Refining margins and crude price

Linking to a comment exchange with Geoff Styles in response to his recent post on the oil earnings backlash. My initial reaction was that it seemed like Geoff was implying that refining businesses are structurally short crude and therefore oil majors are not as long oil as we think they are.

I agree with you and Robert that the majors are price takers, and accusations of "gouging" are generally misguided, but it's misleading to imply that they are not way long crude price. High prices are great for upstream and generally passed through by refining (unless there's some evidence that refining margins shrink when crude prices rise?), so on net a clear plus for the integrated majors.

In brief, I ran a few quick correlations based on this refinery margin data, and came out with R squareds of approximately zero. This would indicate no consistent relationship (i.e. full price pass-through over time), although I recognize that the analysis is crude and I'd welcome any improvements or corrections.

Also keep in mind that while refining margins don't rise and fall with crude prices, it's a highly cyclical industry, and through-cycle returns are pretty thin. Not a place I'd want to be sinking a lot of capital right now, especially with lots of NOCs building refinery capacity for reasons often more related to jobs than pure financial returns.