Here's Why PBF Energy Stock Gushed Higher This Week
The cessation of a ceasefire between the U.S. and Iran has far-reaching consequences.
Overview
Shares in petroleum refiner PBF Energy (NYSE: PBF) rose by 10.6% in the week to Friday morning as the market reacted to the deterioration in US-Iran relations and the breakdown of the ceasefire agreement.
PBF owns and operates six refineries in the U.S. and has a 50% interest in a renewable diesel facility. While its profitability is tied to conditions in the energy market and end demand for its refined products, the key metric that governs its profitability isn't so much the price of oil, but rather the marginal difference between the price of refined products and the oil, feedstocks, and energy products inputs that it uses to produce them. This is something usually referred to as the "crack spread" in the industry.
Details
These observations are relevant in a week when oil prices rose amid a resumption of conflict in the Persian Gulf (thereby increasing input costs for PBF Energy), but the stock rose by double digits in response to a concomitant increase in the crack spread. In other words, the increase in the crack spread more than offset the increase in oil prices.
Source
Originally published at www.fool.com.