The slump in oil prices has been a boon for independent refiners like Valero Energy Corp. (NYSE: VLO). Up ‘til now, that is.

It’s not cheap crude itself that’s caused VLO share prices to dip by nearly 3 percent over the past week, it’s the effect that cheap oil has had on the stock market as a whole. Plain and simple, folks are dumping stocks – the good ones along with the bad – as fears about a global slowdown mount. 

The week’s price action threatens VLO’s year-long uptrend. Still, even with the current slump, VLO’s up better than 53 percent over the past 12 months.

There’s a lot to like about VLO fundamentally, namely year-over-year earnings growth near 40 percent, a contemporaneous 30 percent uptick in net income and a low debt-to-equity ratio. But that’s the past. What of the future?

The engine that’s been driving VLO’s numbers is the crack spread – the difference between crude oil input costs and distillate sale prices. While prices across the entire petroleum complex have fallen recently, they haven’t dipped uniformly. The crack spread – essentially VLO’s gross profit margin – widened as crude oil prices fell faster than tariffs for gasoline and diesel/heating fuels.

But now, the crack spread’s starting to come in. It’s narrowed by 8 percent in the past week alone, mainly because middle distillate prices plummeted. Spot prices for wholesale diesel/heating fuel have sunk below $1 a gallon. Gasoline is now threatening to cross the $1 threshold.

Throughputs will be throttled down soon as refiners begin their maintenance/changeover cycles. That, plus winter seasonality, should backstop the crack. It should. Working against the spread is the pervasive fear of further dampening in refined product demand.

Street estimates of VLO’s fourth quarter EPS reflect the growing pessimism: $1.38 compared with $1.83 a year ago.