Refiners buy in
This purchase is the most recent in a line of strategic moves for Valero. The company sold two refineries in the Northeast because of slim margins caused by imported oil. The Murphy purchase increases Valero's presence on the Gulf Coast and, perhaps more importantly, enables it to increase capacity without the tremendous expense of an equipment upgrade.
Valero isn't the only refiner to walk away with a great find from the Murphy Oil tag sale; Calumet Specialty Products
E&Ps sell out
Murphy joins Marathon Oil
Sunoco acknowledged that its refining business was so bad that even if it cannot sell its refineries, they will go idle by next July. Similar to Murphy Oil, Sunoco's East Coast refineries suffered tremendously under competition from domestic oil, and what proved to be an insurmountable distance from current oil hotbed Oklahoma, where local refining competitors like HollyFrontier
All this wheeling and dealing presents a few options for investors. First, it is an opportunity to reconsider and pursue oil and gas plays that are becoming more efficient -- and hopefully more lucrative -- as they shed refining operations. Second, refineries with growing market share may warrant a second look as well, especially those that can convert cheap crudes in light of the current decline in U.S. demand for gasoline.