Refining Overview
Despite profit margin improvement since the start of 2017, the high cost of RINs led to an increase in operating expenses which more than offset the decrease in cost of goods sold. Refiners’ inputs and products are both commodities, which means that the price they pay for inputs and the prices they receive for their products are generally determined by the market. Therefore refiners earn profits through generating efficiencies, increasing their market share, and producing higher margin goods.
Although the price of refined products has been somewhat down over the first half of 2017, crack spreads increased over the first half of the year giving the downstream markets optimism about the rest of the year to come. Additionally, it is thought that the Trump administration will loosen some existing policies which are burdensome to the oil and gas industry. Overall, the industry has consolidated in order to increase operating leverage.
The data presented in this report includes the most recently available information as of October 31, 2017. This includes public company earnings metrics as of June 30 and information from the EIA as was available.
