What Does a High Stakes Future Hold for Valero Energy’s Refining Business?

The Iran war shock is pushing crude oil prices higher, with West Texas Intermediate trading above $100 per barrel, according to data from Oilprice.com. That surge has significantly increased input costs for refiners including Valero Energy Corporation, putting crude selection squarely in focus.

Valero, however, enters this environment with an advantage that many refiners do not share. Its access to heavy crude matters because those barrels are cheaper than lighter crude such as WTI.

The company also benefits from the flexibility of its Gulf Coast refineries. Those facilities can purchase crude from multiple low cost sources, including the United States, Canada and Venezuela.

This diverse feedstock access gives Valero more opportunities to seek cheaper oil when crude prices are elevated. Lower crude acquisition costs can help contain refining expenses and support profits when competitors have fewer sourcing options.

The broader refining environment also remains favorable. Global refining capacity is constrained, while fuel inventories are low and demand for gasoline, diesel and jet fuel remains resilient.

Continued gasoline and jet fuel demand reflects frequent driving and flying. Diesel consumption indicates that transportation, freight, agriculture and industrial activity are also continuing to hold up.

With refineries busy and fuel supplies not abundant, refining margins for companies such as Valero are likely to remain strong. The same favorable conditions are also likely to benefit Phillips 66 and Par Pacific Holdings, Inc.

Phillips 66 addressed the tight global refining market during its second quarter 2026 earnings call. The company said there are not enough refineries or refined products globally because significant refining capacity is offline and fuel inventories remain low.

China is also exporting less fuel than usual, further supporting the shortage. These conditions are helping keep refining margins, also known as crack spreads, at elevated levels.

Phillips 66 believes the current shortages could take longer to resolve than those seen in 2022. That outlook could support the energy major’s refining profits through the September quarter and potentially into 2027.

Par Pacific has also continued to benefit from a strong refining market at the beginning of the third quarter. Its refining index remained high in July at $31.34 per barrel, only slightly below the second quarter average of about $33.

The index offers a rough measure of the profitability associated with converting crude oil into products such as gasoline and diesel. Its July level indicates that the refining backdrop remained supportive as the third quarter began.

Valero’s market performance has already reflected considerable investor enthusiasm. Shares of VLO have gained 143% over the past year, outpacing the industry’s 118.7% growth during that period.

The stock also commands a valuation above the broader industry average. Valero trades at a trailing 12 month enterprise value to EBITDA multiple of 8.03X, compared with an industry average of 5.81X.

The Zacks Consensus Estimate for Valero’s 2026 earnings has not received any revisions over the past seven days. That unchanged estimate accompanies a refining market characterized by constrained capacity, limited fuel inventories and resilient demand.

Valero currently carries a Zacks Rank #1, designated Strong Buy. Its heavy crude advantage, Gulf Coast sourcing flexibility and exposure to strong refining margins remain central factors shaping the outlook for its refining business.