Is it time for refining stocks to shine? According to a blog post from U.S. Global Investors' (Nasdaq: GROW) CEO Frank Holmes titled "Oil's March Madness a Boost for Refiners," it is. Holmes suggests that the recent spike in oil prices, along with the seasonality of the refining business, could give refiners a much-needed boost and help them catch up to the rest of the energy industry.

Interestingly, over at 24/7 Wall St., energy editor Paul Ausick says just about the opposite -- that the spiking oil prices are terrible for the refiners. In fact, he says that when it comes to recent price action "the worst is already here."

The diverging opinions got me thinking about Holly (NYSE: HOC), a smallish refiner -- though soon to be not-so-smallish after its merger with Frontier Oil (NYSE: FTO) -- that I recommended for a Motley Fool newsletter a few years ago. At the time, Holly -- along with other refiners including Valero (NYSE: VLO) and Western Refining (NYSE: WNR) -- was getting clobbered as oil prices made their trek to the gravity-defying 2008 highs.

Oilgraph

Sources: U.S. Department of Energy and Yahoo! Finance.

Looking back over the historical data, though, I noticed something interesting. It wasn't just 2008; Holly's stock always tended to struggle during periods when crude was rising while it performed well when crude was falling. This actually makes good sense because refiners have difficulty raising their selling price in line with crude when crude is shooting up, so their profits get crimped. On the flip side, though, refiners' selling prices tend to be sticky when crude is falling, so the margin that they pocket reflates.

My expectation was that the 2008 oil-price highs wouldn't hold and when they did start to come down, Holly would benefit. Sure enough, Holly's stock has recovered substantially since 2008 as oil prices fell from the highs before making a more moderate advance.

History repeating?
Are Holly and the other refiners about to get clobbered again as crude prices spike?

Holmes does point out that West Texas Intermediate crude is selling at a substantial discount to Brent crude and that it's boosting refiners' margins. This is actually something that both Holly and Frontier noted when they reported fourth-quarter earnings.

If the differential holds that could certainly help, but I'm skeptical, so I think the bigger question may be whether the recent price run has legs. It's hard to see how further advances wouldn't be problematic, and even if they hold at these higher levels it would seem like profitability would be squeezed. And it bears noting that refiners' margin levels still aren't nearly what they were prior to the 2008 spike, so there's even less cushion now if things get hairy.

Earlier this year, I sold my position in Holly because I wasn't thrilled about the risk/reward that the stock is offering. Instead, I've been more interested lately in the big oil majors like ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) that benefit from higher oil prices and are actually looking to reduce their exposure to refining.

In 2008, the refiners were particularly appealing because it seemed like pretty much everyone had given up on them. Right now, that doesn't seem to be the case, but if this big crude price spike continues, who knows, there just may be another opportunity.