Adding back a position

We traded HFC, Holly Frontier, earlier this year for nice profits.  As the stock rose above our comfort zone into the upper $40's and into the upper $50 per share price zone we exited the position and backed off.  We find HFC to be in the current sweet zone when it comes to the crack price of oil refining due to the bottleneck of oil in Oklahoma and mid continent.  Gushing oil production from the Bakken areas of North Dakota and western Canada is flowing south to the refineries along the Texas Gulf coast, but due to the lack of pipelines the flow is slow and all the crude can not reach the refineries normally.  As long as Obama does not approve the Keystone XL pipeline we see no let up from the large difference in oil sold from the mentioned regions versus world oil price. Therefore the difference is being made up in larger profits by refineries in the US.   Gas at the pump will almost always sell at world price and not US price simply because oil is a world commodity now.  If all this oil actually reached the refineries oil prices world wide would back off. 

Warren Buffet is playing the political angle well talking a progressive line for his buddy Obama, while at the same time making huge profits on the backs of working people by using his railroads to haul the gushing mid continent oil to the Gulf refineries.  Warren also has significant assets via Phillips 66 refineries thereby making money on both ends of this gravy train.  Since Warren has much of the railroad capacity wrapped up by his huge stake in railroads, we play the other end refineries, which frankly are the more profitable end of the trade. 

This game will not last forever since sooner of later there will either be a Keystone Pipeline or a similar pipeline in Canada to the west coast there to relieve this glut of oil. So we will make money while the oil mismatch continues.  HFC has now moved back into the mid $40's where we like it better. So we will soon add back HFC into our trading with a put at $40 and will play it as long as it does not get overpriced again.