SOURCE: Research Driven Investing

Research Driven Investing

March 18, 2013 08:20 ET

U.S. Oil Refiners Battle Lower Margins Due to Rising Renewable Fuel Credits

RDInvesting Provides Stock Research on Alon USA Energy and PBF Energy

NEW YORK, NY--(Marketwire - Mar 18, 2013) - Shares of oil refiners have slid this past week on concerns that rising renewable fuel credits would begin to pressure margins. The Environmental Protection Agency has propped refineries raising the U.S. ethanol mandate to over 14 billion gallons, compared with 13.2 billion gallons in 2012. Research Driven Investing examines investing opportunities in the Oil & Gas Refining & Marketing Industry and provides equity research on Alon USA Energy, Inc. (NYSE: ALJ) and PBF Energy Inc. (NYSE: PBF).

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"There is a potential real stinker of an issue developing for US refiners on meeting obligations related to the US government's renewable fuels standard (RFS) that could materially impact earnings for many of the companies. The price of renewable fuel credits, known as Renewable Identification Number (RINs), has skyrocketed from under US$0.01/gal for ethanol in late 2012 to over US$1.00/gal this week, significantly increasing the cost of RFS compliance for the US refiners so far in 2013." Macquarie wrote in a recent note to investors.

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Alon USA Energy is an independent refiner and marketer of petroleum products, operating primarily in the western and south-central regions of the United States. The company owns and operates crude refineries in Texas, California and Louisiana, with an aggregate crude oil throughput capacity of approximately 250,000 barrels per day. Alon reported a net income of $22.2 million for the fourth quarter of 2012, compared to a net loss of $12.9 million a year ago.

PBF Energy is one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the U.S. PBF's refineries have a combined processing capacity, known as throughput, of approximately 540,000 bpd. The company reported an operating income of $284.9 million for the fourth quarter of 2012, compared to an operating loss of $165.6 million a year prior.

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