In 1718, Spanish settlers built Mission San Antonio de Valero on the San Antonio River.
The mission would later turn into a military outpost.
The converted fort stood in a grove of cottonwood trees hence the name “El Alamo” after the Spanish word for cottonwood trees.
The story of Texas independence can not be told without telling the story of the Alamo and how 200 defenders led by James Bowie, William Travis, and Davy Crocket held out for 13 days against a force that some estimate to have been up to 6,000 led by Santa Anna.
Their story would later become the rallying cry, “Remember the Alamo” in the war for Texas independence.
So when Valero was separated from Coastal States Gas Corp and its first president Bill Greehey took over he chose the name Valero after Mission San Antonio de Valero the first name of the Alamo.
God bless Texas!
The story of the Alamo and the story of Valero have some parallels in that they were both for independence. One for statehood and one to become a viable business as an independent refiner.
Was that a bit of a stretch?
Effe it, let’s go with it.
Back to the task at hand.
If you thought the oil markets of today are volatile the early days of the industry were even more so.
The volatility back then blows away anything you and I have seen in our lifetime.
It took one man and one industry to consolidate it all and provide order to the chaos.
That man was John D. Rockefeller and that industry was REFINING.
Standard investors were rewarded handsomely with consistency in profits and nice fat payouts at ~75% of earnings - that my friends was the original cash returns to shareholders. Sound familiar?
Unfortunately as the industry evolved, refining became an afterthought.
Refining was thought of as capital intensive segment of large integrated oil companies necessary to transform crude from a raw input to a consumable good.
The very fact that prior to the 1990s there were almost no publicly traded independent refiners captures the fact the segment alone was unable to stand on its own 2 feet.
The early 1990s was the nadir for refining. Environmentalism was in vogue as energy prices were cheap and the Clean Air Act was amended in 1990 by the Clinton Administration.
Refining was deeply impacted by these new rules as the EPA mandated emission standards to reduce pollution and thus the adoption of Reformulated Gasoline (RFG), cleaner tier 1 & 2 fuels, etc.
Because of these stringent regulations and low levels of profitability, Supermajors shed their refining assets.
Refining capacity was offshored to Asia, China, India and the Middle East.
The era of Globalization or “Chimerica” was on the rise.
But while others were zigging, Valero was zagging.
Instead of abandoning the refining business, three entities came together to build a powerhouse in Gulf Coast refining with some of the most complex assets able to refine any feedstock of crude.
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