SAN RAMON, CA — Chevron Corp. powered to a gusher of record profits in 2008 that totaled $23.9 billion, the company reported Friday, fueled in large measure by sky-high crude oil and gasoline prices for much of last year.

The full-year earnings for 2008 soared 28 percent above the 2007 profits of $18.69 billion – also a record at that time.

Chevron dropped 10 cents to $70.52, down 0.1 percent. The stocks rose more than 2 percent Friday morning before falling along with other U.S. equities. The broad-based S&P 500 index fell 2.3 percent.

"We achieved much success in 2008," said David O’Reilly, Chevron’s chairman and chief executive.

San Ramon-based Chevron, though, quickly drew criticism from a consumer group that believes Chevron is too profitable and is using its cash improperly.

"Chevron’s robust health is no help at all to the rest of the country," said Judy Dugan, research director with Santa Monica-based Oil Watchdog. "They reached deep into our wallets for these profits. They are using the profits to buy back their stock. They are just sitting on the cash."

Company officials, though, responded that the company will spend $22.8 billion on capital projects in 2009, roughly the levels of 2008.

"Our earnings reflect the scale of the industry, which is a large industry with large earnings, but also very large expenses," said Chevron spokesman Lloyd Avram. "We are investing a substantial amount of money in the search for new energy sources."

From 2002 through 2008, Chevron earned a cumulative $96 billion, but also spent $96 billion in the search for more crude oil and natural gas, according to Avram. "We are investing at our full capacity in the United States and internationally," Avram said. "We are putting all our capital into projects we are involved in." The company’s return on revenues is 8.3 percent, Avram said. That compares with an average return on sales of 8.5 percent for the U.S. manufacturing industry. "What is good for the oil companies is not always good for Americans," Dugan said.

Chevron will curb efforts, for now, to buy back its own shares. The company had spent about $8 billion in buying its shares, O’Reilly said.

"That program has been suspended in the first quarter of 2009, owing to the need to preserve cash in very difficult economic times," Avram said. He added, "Our company is very strong financially. We have a healthy underlying business."

In the fourth quarter, Chevron earned $4.9 billion, or $2.44 a share, up 1 percent from a year-ago profit of $4.88 billion, or $2.32 a share.

Much of the profit was bolstered by a one-time gain of $600 million for a transaction. Still, even excluding the gain on an asset exchange, per-share profits were $2.14. That topped projections from analysts for a per-share profit of $1.82.

To be sure, Chevron has been forced to walk a tightrope that oscillates as crude oil and gasoline prices veer between highs and lows.

Yet the company seems to be balancing challenges in its upstream — exploration, development and production — operations and its downstream — refining and marketing — business, said Robert Sweet, a portfolio manager with Horizon Investment and editor of Dow Theory Forecasts.

"Chevron looks pretty well-positioned," Sweet said. "They are poised to out-perform expectations."

The profit picture for Chevron’s refinery and retail business brightened in the October-December period, primarily due to the largest plunge on record for crude oil prices. That helped to swell profit margins for the company’s refineries and sales of gasoline products.

But because oil prices declined and production drooped, Chevron’s fourth-quarter earnings dwindled for exploration, production and development.

And production will be a key to Chevron’s profit picture in 2009. Chevron has invested heavily in new oil and natural gas projects overseas and in the U.S. But Chevron hasn’t realized as much return on those investments compared with other oil companies, primarily because many Chevron projects are large and complex, Sweet said.

"Chevron has been promising production growth for years and they haven’t been delivering," Sweet said.

However, in the final months of 2008, some big new fields came on line. Production from those projects could ramp up. More fields may blossom in 2009.

"I like the trends going forward," Sweet said. "We are seeing they are delivering more than just promises. There are reasons to be optimistic about Chevron."

Reach George Avalos at 925-977-8477 or [email protected].