Kinder Plans Trading Move to Become Even Bigger Force in Fuels
Kinder Morgan is making moves. The pipeline giant is expanding into fuel trading which if youre keeping score at home means theyre not just moving the stuff anymore theyre gonna be buying and selling it too. Vertical integration baby. Thats the name of the game.
The Houston-based company already operates one of the largest pipeline networks in North America. Were talking about 83000 miles of pipelines and 144 terminals. They move natural gas refined petroleum products crude oil and CO2. Now they want a piece of the trading action that happens between the production and the end user.
According to industry reports the company is building out a trading desk that will focus on refined products like gasoline diesel and jet fuel. The idea is to use their infrastructure position to their advantage. When you control the pipes you know whats flowing where and when. Thats valuable information in the trading game.
Some folks on Wall Street are nervous about this. Trading is risky business. Remember what happened to Enron? Granted Kinder Morgan isnt doing the same kind of speculative nonsense that brought Enron down but the comparison gets made. The company says their approach will be “asset-backed” meaning theyre trading around their physical infrastructure not making wild bets on paper.
Rich Kinder the companys executive chairman knows a thing or two about energy trading. He was president of Enron before leaving to start Kinder Morgan in 1997. The timing there is… interesting. He got out before the ship sank. Make of that what you will.
The expansion comes as refined fuel demand recovers from pandemic lows. People are driving again flying again using diesel for shipping all that stuff. When you look at major companies making big financial moves right now theres a pattern of betting on economic recovery.
Whether this works out depends on execution. Trading requires a different skill set than operating pipelines. You need sharp people making quick decisions in volatile markets. Kinder Morgan says theyve been hiring. Well see if they hired the right ones.
For now the stock hasnt moved much on the news. Investors seem to be taking a wait and see approach. Smart money often does.
