Stillwater Logo
Stillwater Associates LLC Newsletter
 
February 2016 
The February edition of the Stillwater Newsletter begins with Dave Hackett's exploration of the oil market outlook for 2016. Next, Rob Jaques takes a look at the MLP market inspired by the movie "The Big Short."  We're gearing up for the AFPM Annual Meeting in March. Catch Michael Leister's talk on EPA's recent RFS changes for 2014, 2015, and 2016. Subscriptions to Stillwater's LCFS Newsletter will be available soon! Until then take advantage of your complimentary edition. Finally, we had to share our own EJ Ledet's fantastic beignet recipe which is featured on The Today Show website.
The Oil Outlook for 2016

About a year ago we wrote in this space that oil prices would continue to go down. We suggested that $35 was possible for a bottom for West Texas Intermediate price, but thought it would hold around $50 or $60 per barrel. (WTI closed on February 9 at $28.39, down 26% since New Year's Day.)

We pointed out that the EPA had not defined the Renewable Fuel Standard for 2014 or 2015 and hinted that the Keystone Pipeline would be approved.

We also said that lower prices would lead to increased demand for gasoline and diesel. Indeed, the EIA reported that U.S. gasoline consumption was up 2.8% in 2015 over 2014 and California gasoline consumption, despite relatively high prices, was up 3.4%. Interestingly, EIA has distillate fuel (diesel and heating oil) demand down 2.0% through ten months. They expect gasoline consumption to increase by 0.8% in 2016. Distillate fuel demand will grow by 2% over the next two years with the improving economy. 
 
Are MLPs the Next "Big Short"?

The producers of the movie, "The Big Short" had the advantages of Demi Lovato in a casino and Margot Robbie in a bubble bath to explain the complex issues of the financial crisis of 2007 and 2008. You, dear reader, are not so lucky. Today we'll try to identify areas where Master Limited Partnerships (MLPs) might be similar (or not) to the complex financial products featured in the movie and book by Michael Lewis.
 
MLPs are tax-advantaged organizations. Like all partnerships, they do not pay income tax, but unlike most partnerships, MLPs are public companies trading on stock markets.  In the market they appear to be like bonds, with "near-certain" cash flows, but at the same time they behave like a stock, with the opportunity for capital appreciation as the MLP grows. As described in the movie, Mortgage Backed Securities (MBS) were bundles of mortgages packaged and resold to other investors. These don't appear to be very similar, but effectively they are both bundles of assets that generate income. 


 
Wondering about the new RFS standards? Catch us at the AFPM Annual Meeting
    
Be sure to catch Michael Leister's talk at the AFPM Annual Meeting, on March 15th, on how EPA's recent RFS changes for 2014, 2015, and 2016 will impact the various RFS program participants. While you're there, say hello to Michael, Dave Hackett, and Rob Jaques. They'll be happy to answer any questions you have on the impact of the new RFS standards.


Expert LCFS Credit Market Analysis for Covered Entities
California's Low Carbon Fuel Standard is well under way and Covered Entities must participate in California's LCFS Credit Market. It is important that Covered Entities have the right information to make smart Credit Market decisions. Stillwater is pleased to offer a sneak preview of our California Low Carbon Fuel Standard Newsletter. With subscription packages starting at $30 per month, this unique publication will offer weekly, monthly and quarterly looks at LCFS credit and deficit trends based on California Air Resources Board (CARB) data. Weekly reports will include a summary of the week's LCFS news, while monthly and quarterly reports will also include Stillwater's expert analysis of recent trends in the program. 

We'll be offering subscriptions of the LCFS Newsletter soon. In the mean time, complimentary editions of the newsletter are still available.

Complimentary Edition of Stillwater's LCFS Newsletter
This complimentary offer includes the a sample of weekly, monthly and quarterly reports. Please download and review the newsletter, and then let us know what you think. In a couple of days you will receive an email request to fill out a short survey on Stillwater's LCFS Newsletter. Your opinion means a lot to us; your suggestions will help improve the LCFS Newsletter as we prepare it for its commercial debut.

Your password is 
SALCFS15



EJ's Beignets

One of these days we're going to put out a Stillwater Associates cookbook and the first recipe is going to be EJ's Beignets. But the Today Show beat us to it! Stillwater's own EJ Ledet's delicious beignet recipe was recently featured on the Today Show's Food Club website. The challenge was to reinvent breakfast, and these are a brilliant reinvention. Give the recipe a try - you'll love them!

Stillwater Associates is a transportation energy consulting firm. We help our clients understand how fuels get from the source to the service station. If your company is in need of expert advice, please let us know.

Sincerely,

David J. Hackett, President
Stillwater Associates LLC