Refining margins are the most influential driver of downstream (refining and marketing) earnings. Similar to the natural gas market, Fisher Investments knows refining margins differ depending on the regional market. While crude oil costs are generally the same globally, petroleum product prices differ greatly. Since Fisher Investments already discussed supply and demand drivers for oil, the industry fundamentals discussed in this section focus on petroleum products. For simplicity, Fisher Investments will continue using the US-the world's largest petroleum product market -- as our primary example.
The primary quantitative factors influencing refining margins are:
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Petroleum product demand
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Crude oil prices
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Refining utilization
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Petroleum product inventories
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Petroleum product imports
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Light/heavy spread
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