The overall business environment for energy companies is improving at a healthy pace following the coronavirus attack. So now is the time to keep a close watch on petroleum refiners as biofuel blending requirements could potentially be drastically reduced.
EPA plans to reduce US biofuel blending requirements
The Biden administration is proposing to significantly reduce the country’s biofuel blending requirement, according to Reuters. It comes across as a favor for the oil industry after the coronavirus pandemic shook global demand for gasoline.
The country’s biofuels policy is administered by President Biden’s Environmental Protection Agency (EPA). The blending mandates for 2020 and 2021 will likely be lowered to around 17.1 billion gallons and 18.6 billion gallons, respectively, according to the document cited by Reuters. So compared to the level of 20.1 billion gallons, which was confirmed last year before the pandemic wreaked havoc on the energy market, the proposed levels are considerably lower.
The report says petroleum refining companies will likely mix 20.8 billion gallons of renewable fuel into the nation’s fuel blend for the 2022 compliance year. Administrative officials have warned they have not finalized the numbers, which await further revisions. No comments on this event have yet been made by the EPA.
Actions to be won
If the proposals are passed, it would be a big win for oil refiners. This is because with less renewable fuel blended, the costs of blending biofuels will likely decrease. We present three refined stocks that should be on investors’ radar as they could possibly win after the proposal is passed. Each of the actions carries a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Valero Energy Company VLO, which owns operating interests in 15 oil refineries in the United States, Canada and the United Kingdom, gained 3.2% on the news yesterday. The company is also likely to generate strong cash flow from the growing demand for gasoline since coronavirus vaccines are rolled out on a large scale. Over the past seven days, the stock has seen its earnings estimates revised upward for 2021.
PBF Energy Inc. PBF gained 10.8% yesterday on the news. In the United States, the company is one of the largest independent oil refiners. Improving fuel demand also helps inventory. In 2021, the company is expected to experience earnings growth of 54.9%.
Phillips 66 PSX is among the largest refiners in the world and gained 4.2% on the news. It is also favored by the improvement in fuel demand. Over the past seven days, the stock has seen its earnings estimates revised upward for 2021.
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