Valero at Merrill Lynch Conference

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Imported crude has been backed out of the market

“The imported crude has been backed out of the market. It is really primarily the light sweet crude, the West African crudes that has come into the U.S. Gulf Coast because we have the abundance supply of light sweet North American crude now and we just the foreign crudes haven’t been competitive.”

Low nat gas prices are significant

“You look at the right you can see the increase in natural gas production, obviously what this is doing is keeping pressure on natural gas prices which from a refiners perspective is significant to us because it makes up a significant component of our operating expense. I think in the Valero system we consume around 866,000 mmbtu’s per day of natural gas. So although we don’t have the pricing on here, a dollar change in natural gas price has a material effect on our P&L.’

Two important investments

the two most significant investments that I’ve said we have had in the company over the last several years and that’s the two major hydrocracker projects, one is Port Arthur, one at St. Charles we will probably quit showing this to you here at some point in time because the bottom line is that the units started very effectively, they are producing the high quality diesel that we expect it to get when we built them and the economies are on target. We have $800 million of EBITDA that we estimate we have got from these units over the last four quarters”

How will the crude inventory glut resolve itself

“So what’s going to happen? The U.S. refining industry is in a sort of seasonal turnaround, we’re like 86% utilization according to DOE stats, 88, this will all continue probably for the next month or two and what I think will happen at some point in there, is there will be a balance of things that will you will see Contango get steeper and steeper until the surfs trying to get push barrel back into the foreign crude market. And we will see what the U.S. refining appetite is for the crude as it comes online and balance that versus what are the production in North America is.

But the way you will see it manifest itself is you will look at the front end of the curve, the TI curve will get steeper, and steeper and steeper until when it’s full. The next question everybody asks is what is full? I don’t think we know what we — we know what [indiscernible] full looks like I don’t think we know what PAD3 looks like yet.”

We benefit from a glut in crude

“as long as there is a glut of crude in the world or specifically North America, Valero benefits. “‘

There is elasticity of demand for crude

The automakers are reporting truck sales are increasing again and so on so. Conceivably we could end up with a situation although consumer behavior changes slowly. Lower price environment is likely going to stimulate increased demand and although I can’t quantify for you, it looks like the other data points the associated data points would be headed the right direction for that to happen.”