The last time we checked in on Valero (NYSE: VLO), I suggested that the worst was over for the independent refiner. So far, my call was right on the money.

For the first quarter of 2010, Valero posted a loss from continuing operations of $0.18 per share. Yeah, that's ugly compared to the year-ago income of $0.70 per share. But it's a substantial improvement from 2009's Q4, when the company bid goodbye to $0.28 per share.

More importantly, if not for heavy maintenance at a number of refineries (which reduced throughput), Valero would've enjoyed a small gain of roughly $0.06 per share. Currently, management expects that the company will be profitable both in April and throughout the second quarter.

Yet this turnaround is no big surprise. Several weeks ago, I alerted readers that the refining industry was finally set to pop, thanks to widening crude oil differentials and crack spreads. (Try dropping those two phrases at your next cocktail party!)

The favorable effects have shown up not just in Valero's improved results, but also in the first-quarter performance of BP (NYSE: BP), Hess (NYSE: HES), and Royal Dutch Shell (NYSE: RDS-A), with BP seeing the biggest gains. However, not everyone is out of the woods.

ExxonMobil (NYSE: XOM) reported today that throughput dropped sequentially in all regions save Canada. Shell also threw water on the party by pointing out that improved margins were "supported by high levels of industry downtime for maintenance."

Getting back to Valero specifically, the company had other good news to share. The retail segment chalked up its best first quarter ever, and the company's fairly new ethanol operations also performed well, contributing operating income of $57 million. On that subject, Valero picked up three more ethanol plants during the quarter -- bringing its total to 10 -- at prices below replacement cost.

Going forward, management is "cautiously optimistic" about its business and future product demand. But in my book, Valero is gaining a reputation for borderline doublespeak. In a recent investor presentation, the company at one point described its business, and by extension its shares, as a "great way to invest in economic recovery."

But Valero knows that industry fundamentals are more complicated than a simple question of economic recovery vs. stagnation. There's proof of that. Several slides earlier, the company described the problem of spare refining capacity, indicating that meaningfully higher margins will materialize only if existing global spare capacity of roughly 7 million barrels per day comes down to below 5 million bpd. Given that 1.8 million bpd of new capacity is expected to come online this year, we'll need to see significant demand growth combined with many more refinery closures.

And here's the catch: When and if the hints of sustainable demand growth do materialize, what company will want to shutter operations?

I admit that I may be overly pessimistic. Ultimately, Valero and the other independent refiners are stocks that I enjoy covering. But in the current uncertain environment, they're in no way investments that would give me similar pleasure. Readers would do well to make a similar distinction.  

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