Valero Energy Flexes With Energy Policy Changes (Rating Upgrade)

2025-03-13 11:36:31 ET

Summary

• Valero Energy Corporation is a top US independent oil refiner, producing essential fuels like gasoline, diesel, jet fuel, and ethanol, with significant barriers to entry for competitors.
• I am upranking Valero, a $39.4 billion company, to a buy due to its strong position in traditional and renewable fuel markets, a 3.6% dividend, and relatively low stock price.
• Although tariffs are a big unknown, Valero may benefit from lower crude prices and a much friendlier-to-all US national energy policy.

Valero Energy Corporation ( VLO ) is one of the two largest US independent oil refiners. Investors should always recall that demand is not for oil qua oil but for hydrocarbon products like gasoline, jet, and diesel vital to transport and trade. The company’s asset-heavy infrastructure presents barriers to entry for competitors, and it produces needed energy-dense transport fuels.

In addition to its baseline gasoline, diesel, and jet production, Valero is a key ethanol provider. (Ethanol is blended into gasoline.) Valero’s joint venture with Darling Ingredients ( DAR ) is the second-largest renewable diesel manufacturer in the world....

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