What happened

Shares of oil refiner Phillips 66 (NYSE:PSX) tumbled 35.5% in the first six months of 2020, according to data provided by S&P Global Market Intelligence. That was far worse than the S&P 500's 4% loss during the same time period. The loss erased almost all the company's gains from the last 10 years; shares are currently up less than 2% over the past decade.

So what

Government responses to the coronavirus pandemic have been particularly hard on stocks of oil refiners. Travel restrictions have resulted in mass cancellations of flights around the globe. That caused a big drop in demand for jet fuel, a key refined product.

A man's hand holds a gas pump at a filling station.

Image source: Getty Images.

When U.S. governors began issuing stay-at-home orders in late March, automotive travel dropped as well. Susan Patricia Griffith, CEO of auto insurer Progressive, estimated that vehicle miles traveled in the U.S. declined by 40% in March. Gasoline for cars and diesel fuel for trucks, of course, are also key refined products.

Although refiners don't necessarily see a negative impact from falling oil prices -- in fact, cheaper oil can help a refinery achieve higher margins on the products it refines from that crude -- Phillips 66 is still an oil company, and was punished by the market when crude prices tumbled in the wake of the oil price war between Saudi Arabia and Russia.

In response to all this, Phillips 66 has cut its operating and capital budgets for 2020, the better to preserve its dividend, which currently yields about 5%. 

Now what

Phillips 66 is one of the strongest players in a weak industry. Unfortunately, the fallout from COVID-19 on the travel industry seems likely to linger, which will weigh on Phillips 66's performance. For example, while most stay-at-home orders have been lifted, many U.S. workers are still working from home, which will keep gasoline demand lower than normal for the foreseeable future. Likewise, it may take years before air travel returns to pre-coronavirus levels. 

Dividend investors might be tempted by Phillips 66's yield and relatively strong financial profile, but other investors should probably avoid the troubled oil industry