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Valero Energy (VLO) Becomes Part of RFA: What to Expect?

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Per Bloomberg, leading independent refiner Valero Energy Corporation (VLO - Free Report) has joined the leading trade association for ethanol industry of U.S. – Renewable Fuels Association (RFA). This indicates that the previously unwilling fuel producers are now agreeing to blend ethanol with gasoline to take advantage of the rapidly growing biofuels market.

The U.S. Environmental Protection Agency (EPA) has come up with a new requirement specifying the increased amount of renewable fuel that should be added by refiners to their gasoline supply. For 2017, EPA increased the level to 19.28 billion gallons of renewable fuel from the prior 2016 mark of 18.11 billion gallons.

Most importantly, the newly proposed mark for 2017 is higher than EPA’s earlier figure of 18.8 billion gallons and the 18.1 billion gallon target for 2016. The blending of more renewable fuel with gasoline will mostly be done by mixing corn-based ethanol.

Interestingly, Valero had previously opposed the Renewable Fuel Standard that mandates refining players to blend ethanol and gasoline to lower emission.

Why the Need to Lower Emission

Per the Energy Information Administration (EIA), motor gasoline and diesel consumed for transportation in the U.S. during 2015 emitted a total of 1,545 million metric tons of carbon dioxide (CO2). This accounted for almost 83% of the U.S. transportation industry’s total CO2 discharge. This is where the urgent need for reducing pollution and saving the environment comes into play.     

San Antonio, TX-based Valero Energy is the largest independent refiner and marketer of petroleum products in the U.S. With 15 refineries located across the U.S., Canada and the Caribbean, the company has a refining capacity of 3.0 million barrels per day. Over the last one month, the company gained almost 8% compared with the Zacks-categorized oil refining and marketing market’s 7% gain.

Valero Energy also surpassed other refiners like Marathon Petroleum Corp. (MPC - Free Report) , Phillips 66 (PSX - Free Report) and Tesoro Corp. that gained 5.5%, 1.5% and -3.3%, respectively.

These are reflected in the company’s Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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