Publications: Notes at the Margin

Timing Is Everything (December 21, 2020)


PBF's troubles highlight the importance of timing. PBF contracted to purchase Shell’s Martinez refinery in June 2019. Argus Media detailed the decision to buy it. PBF had worked for a considerable time to build a West Coast refining network. Finally, Shell and PBF agreed on a price of around $1 billion. The refinery’s output was put at roughly sixty percent gasoline, twenty-seven percent jet fuel, and thirteen percent diesel.


The one drawback of the purchase was the Martinez refinery's dependence on heavy crude. Argus noted that the discount for heavy crudes had declined due to the increase of light crude production, sanctions on Iran and Venezuela, and producer cuts of heavy crude output. PBF CEO Tom Nibley told reporters that this was not, however, a long-term risk because "those crudes are not going to be kept in the ground or the sand forever."[1] 


The transaction closed on February 1, 2020. S&P Platts reported that PBF paid $1.2 billion for the refinery and inventory.[2] The same day there were a few news stories on the coronavirus. The Centers for Disease Control also held a video press briefing. Dr. Nancy Meissonier, director of the CDC’s National Center for Respiratory Disease, told the audience that the United States had confirmed eleven positive cases in the country.[3] Eleven months later, it had recorded more than eight million positive cases and more than three hundred thousand deaths. PBF’s timing was terrible.


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