Crude Oil Possibilities

Well as most of you noticed the bulls continue to run in the energy sector on refined products.  Group 3 and Gulf Coast continued their rise last week and demand drops and product draws due to refinery shut downs for Isaac.  Crude is back up over $96/bbl and we are not expecting and drops in the recent future.  The most intriguing new (in my opinion) last week, was the new proposed Keystone Pipeline track.  President Obama previously vetoed the Keystone Pipeline due to its path heading through national parks and strategic water reserves.  With this new proposal, there seems to be some very legitimate options on this opportunity coming to fruition.  Knowing the Eagleford Shale continues to boom and the Mississipian and Utica coming online, having direct crude access from Canada continues to limit the United State's dependence on foreign oil.  Long-term this could help the US economically as well.  Having the ability to continue to be a net exporter of refined product (as we were last year for the 1st time in 60 years) will continue to lower our national debt and bring back the economics we have lost over the last few years.  I'm optimistic of these new opportunities as, was as a nation, have the infrastructure and opportunity to continue to grow substantially.  There are a number of small refineries which have been "mothballed" due to production costs, and with the possibility of cheaper crude products, this will allow us to re-open the doors of these refineries and possibly have companies invest to have updated technology to hit capacity.  Crack spreads being at $30/bbl keep even the most conservative investor interested in the refinery sector.  For instance - a refinery doing only 20,000bbls per day has the ability to make:

$600,000.00 per day
$18,000,000.00 per month
$219,000,000.00 per year

This is obviously the gross profit based on today's crack spreads, but with the right financial manager, an investor interested in the refining sector can hedge his crack spread against physical product sales to maximize their capital return.  I have spoken with a couple potential refinery investors and both have stated they expect to have their investments completely paid off within the first 12 - 18 months of their investment.  Considering the value associated with an online refinery, this is an unbelievable return.  There are also some intangible benefits as well.  Being part of the "small refinery" sector can open a company up to having first rights on government contracts as they are mandated to purchase a specific amount of their overall usage from small or underprivileged companies.  I know it is hard to believe, but even people in the oil and energy sector can be considered underprivileged.