VLO: Valero Energy Corp. Message Board

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Gold/Mining/Energy : VLO: Valero Energy Corp.

VLO 169.60

-0.3%

Oct 31 3:59 PM EST

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From: mopgcw	7/17/2008 11:53:20 AM
	of 299

CS: Independent Refiners M. Flannery Global Refining - The Dark Ages • The world is embarking on a period of significant complex refining capacity additions, starting in 2H08 and running through 2012. Most additions will be in Asia, though the US, Russia and eventually the Middle East will also participate. • The short-term consequences of this build out are likely to include: • Lower diesel cracks as Asia returns to self-sufficiency and part of the recent demand surge for diesel abates. US (and some European) refiners will suffer: prospects for a gasoline market revival are dim. • Potentially lower WTI prices as the commissioning of the Jamnagar plant frees up some 'stranded' heavy crude and increases effective upstream spare capacity. Light-heavy crude spreads should narrow on this and on the ramp up of the light-sweet Kursaniyah field in Saudi Arabia in 2H08. • We think the medium-term consequences will include: • A prolonged period of low refining margins which will eventually force the closure of less efficient refineries in the US and Europe (and some in Asia). This is likely to generate some political trouble before it is complete. • The realignment of the US Independent Refining Sector via M&A. • The Golden Age of Refining is behind us and we are entering The Dark Ages. • We have reduced some earnings estimates and 12 month target prices for the US and European Independent Refiners (see separately published report for details).

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