Publicly traded refiners have already lost three-quarters of their stock-market value since 2007, but Caris analyst Ann Kohler has trimmed her price targets further on stocks like Sunoco (SUN) and Tesoro (TSO). Given weak demand and spare domestic capacity, "refiners' fundamentals and margins will continue to remain challenged over the second half, as well as into the next decade," she argues.

Publicly traded refiners have already lost three-quarters of their stock-market value since 2007, but Caris analyst Ann Kohler has trimmed her price targets further on stocks like Sunoco (SUN) and Tesoro (TSO). Given weak demand and spare domestic capacity, "refiners' fundamentals and margins will continue to remain challenged over the second half, as well as into the next decade," she argues.

Integrated oil giants like ExxonMobil (XOM) and Chevron (CVX) should fare better, because their diversified operations make them less dependent on any one market. Unlike the U.S., consumption in less-developed lands should continue to rise, as an emergent global middle class discovers the joy of driving and car ownership.

Integrated oil giants like ExxonMobil (XOM) and Chevron (CVX) should fare better, because their diversified operations make them less dependent on any one market. Unlike the U.S., consumption in less-developed lands should continue to rise, as an emergent global middle class discovers the joy of driving and car ownership.

Chinese behemoth China Petroleum & Chemical (SNP) derives just 10% of its revenue from refining; much of the rest comes from exploration and production. Its American depositary receipts look attractive, trading at just 10 times expected 2010 profit.

Unless demand rebounds, shutting idle refineries and writing down their value could cause another hit to balance sheets. Many refiners managed to raise capital earlier this year, "but if the low-margin environment persists, they may need to tap the capital markets again," says Caris' Ann Kohler, who has Underperform ratings on refiners including Tesoro, Sunoco, Valero, Frontier Oil (FTO), Holly (HOC) and Western Refining (WNR). Although Valero boasts a strong balance sheet, Sankey contends that it has "just 10 more quarters, or 2.5 years, of liquidity available" unless its markets improve.

Unless demand rebounds, shutting idle refineries and writing down their value could cause another hit to balance sheets. Many refiners managed to raise capital earlier this year, "but if the low-margin environment persists, they may need to tap the capital markets again," says Caris' Ann Kohler, who has Underperform ratings on refiners including Tesoro, Sunoco, Valero, Frontier Oil (FTO), Holly (HOC) and Western Refining (WNR). Although Valero boasts a strong balance sheet, Sankey contends that it has "just 10 more quarters, or 2.5 years, of liquidity available" unless its markets improve.

Unless demand rebounds, shutting idle refineries and writing down their value could cause another hit to balance sheets. Many refiners managed to raise capital earlier this year, "but if the low-margin environment persists, they may need to tap the capital markets again," says Caris' Ann Kohler, who has Underperform ratings on refiners including Tesoro, Sunoco, Valero, Frontier Oil (FTO), Holly (HOC) and Western Refining (WNR). Although Valero boasts a strong balance sheet, Sankey contends that it has "just 10 more quarters, or 2.5 years, of liquidity available" unless its markets improve.