Not All Oil Is Created Equally
Prices for a barrel of oil plummeted in 2015 for a variety of reasons, but this was good news for some in the oil business. Low prices of crude oil and high demand sparked by Americans driving more than ever means the companies in the refining business are having a heyday. Last year U.S. refineries including Valero Energy (VLO), Tesoro Corporation (TSO), and Phillips 66 (PSX) set processing records, and don’t show any signs of stopping in 2016.
Past Year Performance: VLO +46.62%, TSO +48.66%, PSX +25.99%
Regret: Assuming that health of one part of the industry would affect its entirety. We dropping oil prices meant ruin for all, but we failed to think of who might actually benefit from this turn of events.
Lesson Learned: Pay attention to cycles and relationships among different parts of an industry. In this case, oil producers and oil refiners seem to benefit from opposite sides of the coin.