Cramer and Dicker: End of the Export Ban Means the End of the Game for Refiners

Tickers in this article: EPD HFC PSX PXD TSO VLO WNR XEC

NEW YORK (TheStreet) -- I was talking to Jim Cramer today about the end of the crude oil export ban, which is the way I view the recent decision made by the U.S. Commerce Department to classify "condensates" as a refined product.

The ruling was delivered specifically to Pioneer Natural Resources and Enterprise Product Partners to allow a very specific type of condensate that Pioneer distills to be exported. But one ruling will necessarily lead to many, as exploration and production companies in the major U.S. shale plays start to clamor for similar dispensations to export their local brands of lightly distilled crude.

All of these companies want to capture a global price of crude oil that has been running more than $6 dollars a barrel higher than their own and in some local cases as much as $20 a barrel higher. That was the incentive for Pioneer CEO Scott Sheffield to look to create this workaround through the Commerce Department instead of seeking a full end to the 40-year old export ban, which would require an act of Congress.

The E+P companies that can access these distillation services and access higher global markets will be the biggest winners.

For shareholders of refinery stocks, however, this is about the worse news that they could get. Refining is all about margin and two of the U.S.'s largest independent refiners, Valero and Tesoro , saw their share prices come from single digits in 2008 to trade at $50 and $60 today based upon a strong discount in the price of domestic crude oil that has been more than $5 a barrel and sometimes as high as $25 a barrel. Those discounts are about to disappear forever, and with them the terrific margins that these and other refiners have been enjoying. I see a long downturn in refinery stocks ahead.

I talk more about this small Commerce Department ruling with big implications for the oil industry with Jim in the video above.

At the time of publication the author had no position in any of the stocks mentioned.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


TheStreet Ratings team rates PIONEER NATURAL RESOURCES CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate PIONEER NATURAL RESOURCES CO (PXD) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share." You can view the full analysis from the report here: PXD Ratings Report