When even industry leaders can't turn a profit, it may be time for investors to get out of the industry. Or, if you're a contrarian, jump in.

Independent refiner Frontier Oil (NYSE: FTO), which has historically enjoyed above-average pricing power, recently booked its second consecutive quarterly loss. And this time, even operating cash flow dipped into the red. All told, the nightmarish refining environment of 2009 pushed the company to an annual loss for the first time in a decade.

Is it any consolation that the likewise regionally advantaged Tesoro (NYSE: TSO) also posted a yearly loss? Probably not.

Breaking down Frontier's numbers, the fourth-quarter net loss clocked in at $0.72, compared to earnings per share of $1.15 in the year-ago period. On the year, Frontier lost $0.81 per share, versus EPS of $2.18 in 2008.

However, the losses were driven by a fourth-quarter change in inventory-related accounting methods, which reduced 2009 pre-tax income by $253 million, or roughly $2.44 per share.

Yet that's not to say that performance would've been stellar without the mirage of accounting convention. Frontier's 2009 operating cash flow was $140.9 million -- well below the $297.3 million hauled in during 2008. On the flip side, keeping OCF in the black to any extent might be considered an achievement. Moreover, the company's poised to collect approximately $100 million in cash tax refunds this year, with most of the largesse associated with the recent accounting change.

What's the industry outlook going forward? For starters, let's remember that fellow independents Holly (NYSE: HOC) and Valero (NYSE: VLO) both posted fourth-quarter losses, while the U.S. refining arms of integrated majors ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), and ConocoPhillips (NYSE: COP) fared no better. None of these names have offered what I would consider a positive market forecast.

Instead, the industrywide focus appears to be on improving operating efficiencies. On that note, Frontier management said that it's executing well on its Cheyenne Refinery upgrades, where light-crude-based gasoline and diesel yield was up 9%. Meanwhile, the company closed out the year with net cash at nearly $80 million -- a nice cushion against continued hard times.

Also, because Frontier operates only two refineries (which are geographically insulated, nonetheless), management probably has a better chance of keeping capacity utilization at higher levels. Given the largely fixed costs of running a refinery, that translates into better profitability. And with only two operations under its wing, shareholders are unlikely to see facilities permanently shuttered -- a familiar event for Valero investors.

Ultimately, Frontier is the scented air freshener of an industry that, for the time being, just plain stinks. Is that reason to invest? I'm not sure, but I've certainly encountered more compelling arguments in my time.

Fool contributor Mike Pienciak holds no financial interest in any company mentioned in this article. The Fool has a disclosure policy.