THE SAN FRANCISCO CHRONICLE (California)
This spring’s punishing oil and gasoline prices helped propel Chevron Corp. to the highest quarterly profit in its 128-year history — $5.38 billion — the San Ramon company reported Friday.
That’s 24 percent more money than Chevron made in the same quarter last year and easily beats the company’s previous record of $5.02 billion set in last year’s third quarter. Chevron‘s profit for the first six months of this year now stands at $10.1 billion, compared with $8.35 billion for the first half of 2006.
But Chevron, the nation’s second-largest oil company, also benefited from a record-setting rise in gasoline prices. The national average for a gallon of regular hit $3.23 in May and has since fallen to $2.92. California’s average peaked at $3.49 and now stands at $3.10.
Profit for Chevron‘s refining, marketing and transportation operations in the United States reached $781 million in the second quarter, a 41 percent jump from the same period last year.
Consumer advocates have long suspected oil companies of manipulating prices, and this spring was no exception. The price spike was caused by mechanical problems at gasoline refineries — not by an increase in the cost of crude oil — and advocates questioned whether the oil companies weren’t deliberately cutting supplies to increase the price, perhaps by extending repairs at the refineries.
“You can’t justify gasoline prices with oil prices, at least not in the second quarter,” said Judy Dugan with the Foundation for Taxpayer and Consumer Rights. “American drivers are disproportionately paying at the pump to boost corporate bottom lines.”
Oil industry representatives call such charges absurd.
Finding spare supplies of gasoline when a refinery shuts down usually costs the companies, they say. They also note that not all refinery downtime raises gasoline prices. Chevron spokeswoman Stephanie Price pointed to her company’s recent upgrade of its huge refinery in El Segundo (Los Angeles County).
“The El Segundo refinery went down at the beginning of June, and prices actually decreased,” she said.
With gasoline prices falling across the country, Chevron‘s refineries probably aren’t making as much money now as they did during the second quarter.
Oil companies don’t reveal precise profit figures for refineries. But one rough measure of profit for all refineries on the West Coast shows that they have dropped by two-thirds since peaking in early May.
To Wall Street analysts, that suggests that gasoline prices will keep dropping.
“You might see a bit of a spike before school starts, but they’re not going to get anywhere near the level they were at around Memorial Day,” said analyst Justin Perucki, with the Morningstar research firm.
Chevron‘s report capped a week of strong earnings for the biggest international oil companies.
Only ConocoPhillips suffered, with its profit plunging 94 percent to $301 million. But that was due to the company’s decision to pull out of Venezuela rather than accept President Hugo Chavez’s terms for staying and converting Conoco‘s operations into a joint venture with the state-run oil company. ConocoPhillips wrote off $4.5 billion as a result.
Despite the rosy results for most companies, there were a few hints of trouble. The amount of crude oil pumped from the ground in the second quarter fell for BP, Chevron, Exxon and Shell. Production from oil fields naturally declines with time, and all oil companies face constant pressure from investors to find and tap more fields.
Chevron‘s production worldwide slipped about 1 percent, to 2.63 million barrels per day. The company has announced delays in starting production at Tahiti, an oil field deep in the Gulf of Mexico, and Wall Street is anxious to see more of Chevron‘s development projects completed.
“Tahiti already had some delays, and we don’t want to see any more like that,” said Philip Weiss, senior analyst with Argus Research. “Because that’s really the key with Chevron, coming through with some of the stuff that’s in the pipeline.”
Chevron spent $4.5 billion in the second quarter on exploring for oil, drilling wells and upgrading refineries.
Total revenue for the quarter topped $56.09 billion, up 4.7 percent from $53.54 billion in the same quarter last year. The company’s profit this year also benefited from a lack of hurricanes. In the second quarter of 2006, Chevron was still paying for repairs to Gulf of Mexico platforms and pipelines damaged by Hurricanes Katrina and Rita in 2005.
CHEVRON CORPORATION (San Ramon, CA)
2007 Revenue: $56,094,000,000
2007 Net profit: $5,380,000,000
2007 Share earnings: $2.52
2006 Revenue: $53,536,000,000
2006 Net profit: $4,353,000,000
2006 Share earnings: $1.97