When it comes to investing in crude oil refiners, investors have ample reason to refrain from gassing up. From deep job cuts at Sunoco (NYSE:SUN), to refinery closures at Valero Energy (NYSE:VLO), the group is clearly challenged by demand decline. That said, while capacity utilization rates and capital expenditure cuts grab worrisome headlines for the industry behemoths, volatility-tolerant investors may find a light and sweet opportunity in gallon-sized crude-cooker Frontier Oil (NYSE:FTO).

No time for an unrefined view
Unlike Alon USA Energy (NYSE:ALJ) and Western Refining (NYSE:WNR), both of which carry substantial debt burdens, Frontier had the lowest debt-to-capitalization ratio among its peers at the close of 2008. The company also takes top bragging rights on five-year average return-on-equity and certain operational efficiency metrics. Based on year-end stats, the balance sheet is bolstered by roughly $484 million in cash and $283 million available under a revolving credit facility.

Distinct from a company such as Valero, whose refineries dot the country, Frontier operates in something of a geographic niche market. Consequently, in gasoline and diesel sales, the company has consistently enjoyed superior pricing to the tanker-bound Gulf Coast region. Moreover, Frontier's mid-continent and Rocky Mountains markets are relatively well insulated from foreign imports.

Mind the spread
Like any company, Frontier does have business risk, although it is more smoldering matchstick than Molotov cocktail in my opinion. Currently, the most pressing concern is the price differential between two grades of crude oil, known as the WTI/WTS spread. In simplified terms, Frontier's El Dorado refinery acquires a lesser, or more "sour," grade of crude -- typically at a price discount to the higher-quality vintage -- and, owing to certain refining capabilities, is able to produce comparable end products. When the spread between the two grades of crude widens, Frontier's margins expand accordingly, and vice versa.

It is important to note that Frontier's actual prices may differ somewhat from publicly available figures. That point acknowledged, since the start of 2009, the quoted WTI/WTS spread has exhibited a narrowing trend. Often, the differential has collapsed to less than $1, compared to an average realized spread of $3.92 in 2008 and $5.02 in 2007. Although this development is probably best viewed as a short-term phenomenon, investors may want to keep an eye out for management's comments on the crude spread when the company reports first-quarter results.

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Fool contributor Mike Pienciak does not hold shares in any company mentioned. The Fool's disclosure policy is refined in more ways than one.