Originally Posted by
KC10 FATboy
I agree with you. However, what concerns WS about the refinery is that ConocoPhillips, whose expertise is refining oil, couldn't produce a profit. And now DAL, whose core business is not refining oil, is telling the market they can buy, contract it out, and turn a profit/lower the price of jet fuel.
Does DAL management know something that the oil refining experts don't?
That is the $250 million question.
I don't think they do but they didn't buy the refinery for profit. I think it costs X amount to refine the crude. Given that the crack spread on gasoline is well below the crack spread for Jet A, it makes sense that delta will cover more of the refinery costs by refining more Jet A. But Delta has to put $100 million in to do that. Those upgrades will change X. We'd know more if we knew what the Nelson Complexity Index wold change to from it's current 8. However, if they can cover their refining costs for less than the Jet A crack spread, they win. If not, they lose.