A very interesting WSJ article on Citgo – which Venezuela bought two decades ago to market its hard-to-refine heavy oil – changing its focus to feed cash to President Chávez’s social programs in Venezuela.   As the article notes:

“…while other U.S. refiners have invested heavily to take advantage of historically wide profit margins in the business, Citgo has been slimming down. It has slashed its investment and sold off U.S. assets, most recently by agreeing last week to shed a unit that turns crude oil into asphalt… Citgo has sent the extra money to its sole shareholder, the Venezuelan government. Citgo has raised its annual dividend to more than $2 billion, from $225 million in 2000.

The changes at Citgo are altering the U.S. fuel landscape. Citgo owns 5% of U.S. refining capacity, a significant chunk at a time when U.S. demand for fuel is growing faster than domestic production, and no new refinery has been built in three decades. Citgo’s production will stagnate, adding to pressure on pump prices and fuel imports.

…The strategy also contrasts with those of some other national oil companies, such as Saudi Arabia’s and Brazil’s, which invest heavily in both production and refining.

…By largely avoiding U.S. investment, Citgo didn’t fully exploit a refining boom of which other companies took full advantage. Citgo’s capacity barely grew, and then declined 12% with last year’s sale of a co-owned refinery. Citgo found itself having to buy gasoline on the open market to supply some gas stations. So last year it shed about 1,800 of the franchised stations. They now total about 8,000, down about 50% from their 1990s peak…”