U.S. oil companies seem to be giving up on synergy, spinning off their refining businesses so that they can focus on oil production. Conoco, which I previously recommended, announced yesterday that it would split in two, thereby creating an exploration and production company and a separate oil refining business, each of which would be among the largest companies in their respective industries.
This announcement comes only a couple of weeks after Marathon spun off its refining business. In both cases, the shares reacted positively to the news.
In my view, conservative investors should continue to hold the exploration and production stocks and sell the refineries. Oil prices could dip temporarily if the global economy turns down again. But more expensive production costs for oil that is harder to reach, combined with growing global demand, should lead to higher oil prices over the long term.