| Sponsored One-Click Petition: Tell Your Congressman to Audit the Fed Thanks to the Federal Reserve, the basic necessities of life have become so expensive...
The same $1 that once bought you three gallons of gasoline will only buy you one-third of a gallon...
The price of everything else from healthcare to college tuition continues to soar...
And a full 70% of American workers plan to work for pay after they retire.
Our colleagues at The Project to Restore America have created a special one-click petition designed to stop this senseless destruction of our savings.
If you agree that we cannot allow the Federal Reserve to devalue the dollar any more, please click here to show your support.
| | Profiting from High Gasoline Prices | by David Fessler, Senior Analyst
Thursday, February 28, 2013 | | If you live in a major city, there's a good chance you rely on some form of public transportation to get around. The rest of us, however, are stuck visiting the gas pumps.
Since the beginning of 2013, it's been anything but a happy New Year, at least as far as gasoline prices are concerned. Since January 1st, the average price for a gallon of regular gas is up about 45 cents.
There's no question that part of the rise in gasoline prices is due to higher prices for crude oil. But the bulk of the increase is due to what is known as the gasoline crack spread.
The crack spread is the difference between the price of crude oil and the wholesale price of gasoline. This can be easily seen in the chart below, courtesy of the Energy Information Administration (EIA).
The graph tracks wholesale gasoline (priced per gallon) as compared to Brent crude oil (priced per barrel). Brent crude is linked to gasoline wholesale prices sold in most areas of the U.S. From January 1st through February 19th, Brent prices increased $6.00 per barrel. That equates to about 15 cents per gallon.
What about West Texas Intermediate (WTI) that comes from the Bakken, the Eagle Ford and other growing sources here in the U.S.? WTI is pipeline limited to most U.S. refineries. In addition, most U.S. refineries are set up to handle heavier crude.
More on Crack Spreads
There are different types of crack spreads. Refining margins are often estimated using crack spreads. A single product crack spread denotes the divergence in price between a barrel of crude oil and a barrel of gasoline or diesel. The most common single product crack spread is the one for gasoline.
However, it is not uncommon to calculate crack spreads using crude oil in combination with various refined products. The 3:2:1 cracks spread is a common multiple-product crack spread. It reflects the fact that a single barrel of crude produces two barrels of gasoline for every one barrel of distillate (diesel and bunker fuels).
The spread is actually calculated by adding the price of two barrels of gasoline and one barrel of distillate together and subtracting the price of three barrels of crude from the total. | Sponsored Over 33 Million Miles Away, It's Now Searching for Life on Mars Did you know it can take up to 21 minutes just to send a control signal to the Red Planet from Earth? Yet the Mars Curiosity Rover continues to perform flawlessly. It's now headed to Mount Sharp, considered the best spot for hunting down the building blocks of life. Yet here's what most people don't know: Curiosity's journey wouldn't be possible without a tech breakthrough from one small Midwest firm... a company already working on its next shocking innovation... one so huge, it could soon revolutionize every computer, television, and smart phone here on Earth... and make early shareholders very wealthy. See the details here. | What Contributes to Rising Crack Spreads?
While there are many factors that go into calculating the crack spread of gasoline, here are a few of the main ones: - Refinery outages are always a factor. Whether they are planned or unplanned, an outage immediately reduces the U.S. capacity to produce gasoline.
- Global demand is generally in the up wards direction on an annual basis. There's no reason that won't continue. It's that constant increase in demand that can effect refinery utilization rates, product mix and maintenance requirements.
- The refineries also have to shut down twice a year to switch from summer grades of gasoline to winter and vice-versa.
During the last quarter of 2012, the crack spreads for gasoline were extremely low. For some periods, they were actually negative. This meant a barrel of gasoline (at the wholesale level) actually cost less than a barrel of Brent crude.
Could gasoline be headed even higher from here? It's hard to tell, given the multitude of factors that go into the cost of a gallon of gas. The crack spread is just one of the components (albeit a fairly large one) of that cost.
Short-term, the outlook for both gasoline and crude prices remains volatile. Things like extreme weather or geopolitical events (or the threat of either) also play a role in the price on any given day.
The Best Way To Save (Make) Money on Gasoline
HollyFrontier Corporation (NYSE:HFC) isn't exactly a company on the tip of everyone's tongue when talking about crude oil refineries, but perhaps it should be. The company operates five refineries with a combined crude throughput of 443,000 barrels per day.
HollyFrontier primarily serves high-value markets throughout the Southwest, Rocky Mountain and Mid-Continent regions of the U.S. That's where its refineries are located too. That gives it a big advantage over coastal refineries. Why?
Most of the crude it uses as feedstock is WTI as opposed to Brent. WTI crude has been trading for as much as $20 per barrel less than Brent. Company shares have soared 61% over the last 12 months.
But don't let that scare you. At 7.24, HollyFrontier has one of the lowest price-to-earnings ratios in the refinery sector. With its near-singular access to WTI, this could be one of the best bets for future earnings and share appreciation.
So while "pain at the pump" may be eating a hole in your wallet, you might be able to offset the damage by adding a few shares of HollyFrontier to your energy portfolio.
Good Investing,
Dave
| Editor's Note: There's another little-known energy company that we believe will triple from today's prices - no matter what happens with our fiscal issues in Washington. For the full story, click here. |
   
Market Metrics Better than Gold The value of timber continues to shine. In mid-January, Carl Delfeld showed us why timber is one of the best assets you can own. It's even better than gold, he claimed.
His timing was perfect. Over the last few months, gold has sunk, but timber prices have continued their climb higher. As the housing market recovers and the world's economy limps forward, the trend will only accelerate.
One of my favorite ways to play global timber demand is through Rayonier (NYSE: RYN) - a company with more than 2.5 million acres of forest under its management. Its 12-month chart proves that timber has most certainly been better than gold.
-Andy Snyder 
Click here to view the full chart. |
| More Good News for Uranium Stocks The news just keeps getting better for uranium mining companies...
Is Uncle Same About to Inflate These Stocks? The easiest way to make money in the market is to find a stock the big investors are about to load up on and buy it first. Well, nobody has bigger pockets than Uncle Sam...
The World's Most Unstoppable Trend Matthew Carr looks at one trend that will NEVER die. And these four stocks should continue to profit...
S&P's $5 Billion Lawsuit: Why it Matters and What to Do Earlier this month, the U.S. Department of Justice announced it was suing Standard & Poor's for $5 billion. Find out why it matters to you and your portfolio...
| Sponsored Banned! For many years, Americans were barred from owning shares in one very profitable energy company. Only traders with over $100 million were allowed to purchase the stock.
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Don't Short Treasuries Just Yet...
| Sponsored "This could change the future of computers and other devices forever" MIT experts now predict five billion people will use tablets or comparable devices within a decade. And a new technology breakthrough stands to make all of these gadgets faster, lighter, and cheaper than imaginable. The BBC reports this innovation "could change the future of computers and other devices forever." Most shocking is that one small company holds the key patents on this discovery. Its earnings could soon mushroom from millions, to billions. And of course, its underpriced $9 shares would explode too. Full details here. | |
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