Phillips 66's refining segment would pay more in taxes under early proposals from Republican lawmakers that raise the cost of US imports, the company said today.
Possible changes that reduce taxes on corporate profits to 20pc and increase the cost of imports could benefit the company's midstream and chemicals segments, Phillips 66 chief executive Greg Garland said during a quarterly earnings call.
But the policy could become a headwind for the company's refining segment running large volumes of imported crude, he said. There is little clarity on what Congress and the Trump administration would try to implement.
"Our view is that there is a lot of ground left to cover, and that getting this tax change through is going to take more time than what people think," Garland said. "But if this border tax goes through in the form as we understand it, we would pay more taxes on the refining business at 20pc than we pay at 35pc today."
Phillips 66 imports large volumes of Canadian, Mexican and Opec member crudes. Total crude imports across the company's owned and joint venture US refineries averaged almost 900,000 b/d in 2015, according to the Energy Information Administration.
Imported crude prices could increase by 25pc and retail gasoline prices by 30¢/USG to 40¢/USG, Garland said. The outlook echoed Valero and Marathon Petroleum guidance given during separate earnings calls earlier this week.
"It just does not work" to take refining losses from higher crude costs, Garland said. "It is going to get mostly passed through."
Heavy turnaround work underway this quarter had muted any effects of falling exports from Opec and non-Opec countries who agreed in December to slow supplies by a combined 1.8mn b/d through the first half of this year. The discount for heavy crudes compared to light crudes could narrow, but it may take several quarters to occur, president Tim Taylor said.
Phillips 66 still saw strong fuels demand, supported by ongoing problems in Latin American refining reliability, the company said.
US products inventories have grown in January, reaching a record level on the US Atlantic coast. But Phillips 66 said the company was seeing slightly stronger year-over-year demand, including an improvement in diesel for transportation.
