Fuel Refining Margins Zoom, Rest of 1st Q Report Lists Minuses

Santa Monica, CA — Chevron, like Exxon Mobil and the other major oil companies, saw its earnings in the traditional oil business dip in the first three months of the year, while a broken market allowed it to make up the difference with a sharp spike in the price of gasoline and other fuels. The Foundation for Taxpayer and Consumer Rights noted that unusual refinery outages that cut total output are the reason Chevron‘s refinery profit margin was so high. The company has shorted the market to artificially drive up gasoline prices.

Analysts today credited Chevron’s $700 million sale of a European refinery for a $4.27 billion record 1st quarter profit, an 18% increase from last year’s record. Yet the story for consumers and the economy is that Chevron‘s refinery profits, as for other oil companies, are so high that it would have set a new record without the sale. With gasoline prices spiking again today, it is urgent for elected officials to get a regulatory grip on what is happening in the refining industry, said FTCR.

“A company that seems barely able to keep its refineries running, and saw oil prices dip from last year, took advantage of an uncompetitive market to make up its losses with spiking gasoline prices,” said Judy Dugan, research director of FTCR and its OilWatchdog.org project. “In the toy business, a fire at the Barbie factory would mean less profits, not more, for Mattel, because it couldn’t simply double its profits on the remaining dolls. In the car business, lower steel prices would become lower prices for car buyers, because General Motors has to fight for competitive advantage against Toyota. None of that is happening in the oil industry because its few remaining giants have no reason to compete, and government is turning a blind eye.”

Chevron‘s input at its U.S. refineries was 729 million barrels per day for the quarter, down 22% from the first quarter of last year because of longer “planned maintenance” downtime and accidents including fires. That restriction of output was more than made up for by refining margins that shot up nearly 46% to $27 per barrel on the U.S. West Coast, said FTCR. Chevron, based in San Ramon, controls one-fourth of the total refinery capacity in California. Its total profit on U.S. refining operations rose 66% — far more than at international refineries once the $700 million sale of a plant in the Netherlands is subtracted.

“Oil companies are no longer able to cite oil prices as the major force behind gasoline prices, because gasoline has risen faster and stayed higher, in comparison to oil, than the historical pattern,” said Dugan. “Now they cite supply and demand, as though oil and gasoline were normal markets. They’re not, because oil companies have shaved away any cushion in refining capacity or supplies on hand. They control the supply and keep it short, forcing prices higher.”

Gasoline prices jumped nationally by nearly 2 cents overnight, to $2.90 a gallon for regular, according to AAA. California was up to $3.367 on average, only about a penny short of last year’s all-time record. With wholesale markets shooting upward in the last few days, greater increases at the pump are expected next week.

“It will be political malpractice for Congress, regulators and state government to continue to ignore the growing evidence of price-gouging in gasoline to keep profits at record levels,” said Jamie Court, president of the nonprofit, nonpartisan FTCR. “Government has the ability and responsibility to regulate refinery capacity, output and supplies on hand, which would produce fairer gasoline prices.”

FTCR has also called on government to press for more conservation and robust alternatives to gasoline, including biofuels, to reduce the control of Big Oil over transportation fuels.

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See www.OilWatchdog.org and click on “news releases” for FTCR’s comment Thursday on Exxon profits and Tuesday on BP.