The Bizarro Valero

Over the decades, Bill Greehey built a monster of a company over at Valero Energy (NYSE: VLO). The country's largest independent refiner just reported net income of more than $1.25 billion for its latest quarter, even amid a rather scary margin squeeze. You'd think that accomplishment would be enough for the guy, but he's gone on to head up the company's midstream spinoff. I dub it Bizarro Valero.

I'm referring to the inverted version of Superman, in which Bizarro Superman says and does the opposite of whatever Superman would do. Valero has directed a great deal of effort toward generating gasoline and diesel products from cheaper, lower-quality crude oil. Smaller players such as Frontier Oil (NYSE: FTO) have followed this profitable path as well. Bizarro Valero has decided to make asphalt, a more traditional product of heavy crude factions, instead.

How many headlines have you seen in the past week about the record price of asphalt? About zero, I'd imagine. It isn't nearly as sexy as oil, but the economics of asphalt are quietly becoming very attractive. As more and more U.S. refining capacity is dedicated to creating fuel out of heavy crude, potential asphalt supply gets squeezed.

Bizarro Valero trades under two listed vehicles. In a format common to energy cash cows like Kinder Morgan Energy Partners (NYSE: KMP), there is a general partner, NuStar GP Holdings (NYSE: NSH), and a master limited partnership, NuStar Energy (NYSE: NS). Operations are conducted by higher-yielding NuStar Energy, due to its tax-advantaged status. The general partner takes an increasing cut of the cash distributions as NuStar ramps up its business.

NuStar handles far more than just asphalt across its network of pipelines, terminals, and storage facilities. But with Wednesday's announcement of an acquisition of assorted CITGO assets, NuStar's asphalt ascendancy is reasonably assured.