Why Marathon Petroleum Corp (MPC) Earnings Are At Risk

Still, Marathon Petroleum Corp (NYSE:MPC) has taken steps to ensure it can still use unconventional sources of cheap oil. It upgraded its Detroit refinery to handle heavy crude from Canadian oil sands, thereby benefiting from still-substantial discounts in prices of Canadian oil compared to WTI.

The big question facing the industry is whether prices will continue to support export expansion. Phillips 66 is aiming to boost its export capacity by another 50% despite the fact that it’s currently using only about half its existing capacity. Similarly, Tesoro Corporation (NYSE:TSO) recently noted that falling use of refined fuels in the U.S. is making refiners much more dependent on export markets for demand. In particular, with Mexican refineries not as able to deal with Mexican heavy crude as U.S. refiners, the circular trade whereby crude came in from Mexico to be refined and then shipped back in the form of gasoline and diesel looks likely to continue.

In the Marathon Petroleum earnings report, look closely at changes in margins to identify whether the company has still been able to access low-cost sources of crude oil inputs. Without those cost advantages, profits will inevitably suffer unless discounts for domestic crude return in the near future.

The article Why Marathon Petroleum Earnings Are At Risk originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned.

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