Sunday, November 9, 2008

Ideas From Anywhere

It is amazing where investment ideas can come from. I was just messing around browsing news sources and saw this is on I had no idea this was going on. I am not that all familiar with liquid asphalt though I have spent time and invested in the actual aggregates.,2933,449172,00.html

Expect a bumpier drive. An asphalt shortage is delaying road maintenance projects in communities nationwide. Asphalt is becoming scarce as U.S. refiners overhaul their equipment to maximize output of highly profitable fuels such as diesel and gasoline, using inexpensive — and hard to process — crude oil.

To make things worse, refiners are also cutting back on the production of a petrochemical that many states mix into asphalt to make roads more durable.

Dozens of road repairs were delayed last summer and municipalities around the country may face another shortfall next summer. Road-maintenance projects that have gone forward cost significantly more as the price of asphalt nearly tripled over the past year.


In the past, about 40 percent of an oil barrel would be turned into asphalt products and now it's around 10 percent, McMinimee said.

The reason for the decrease

The shift in refinery technology that led to the decline in asphalt production was spurred by increased oil prices.

Oil refineries around the country are installing billion-dollar machines called "cokers" that are able to refine the chunkiest, low-grade and least expensive crude oil into highly profitable fuels, such as gasoline and diesel.

Which has resulted in:

The U.S. is currently undersupplied by about 24,000 barrels of asphalt a day, or 5 percent of daily demand, and that number is expected to jump to 257,000 barrels a day by 2012, according to San Antonio-based NuStar Energy L.P., a producer of asphalt.

Other impact because of substitution:

The skyrocketing price of asphalt has had at least one positive effect — on the concrete industry, as its product becomes more attractive to city engineers.

So I started digging around and went to NuStar's website and saw this on the front page of the website:

NuStar Energy L.P. (NYSE: NS) today announced that it has successfully completed its acquisition of CITGO Asphalt Refining Company’s asphalt operations and assets for $450 million, plus inventory of approximately $360 million subject to post-closing adjustment.

So then I went to go look at some of the fundamentals of the company and found out it is paying a 9.44% dividend yield. Now I am a long way from making an investment. It is just amazing where ideas / work comes from.

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