PROFITS JUMP IN STEP WITH RECORD GAS PRICES
The Daily News of Los Angeles
The record prices California motorists have paid for their gasoline and diesel in recent months fueled record profits for oil companies, who reported major increases in quarterly income this week.
“It’s been a lousy week to be a motorist,” said Jamie Court, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. “This is going to make for $3 for gasoline very quickly. That’ll be almost pure profit for oil companies who’ve been gouging for so long, just because they can get away with it.”
San Ramon-based refiner ChevronTexaco Corp., the last to report Friday, saw first-quarter revenue climb to $33.6 billion to $31 billion from the same period a year ago. Income hit $2.6 billion, $2.40 per share, up from $1.9 billion, $1.81 per share, in the like period a year ago. This blew past expectations of analysts polled by Thomson First Call, who’d expected earnings per share of $2.01. The refining and marketing segment, which most directly influences prices paid at the pump, more than doubled to $640 million from $315 million a year before.
ChevronTexaco’s competitors reported equally positive news this week. ConocoPhillips’ refining and marketing income more than doubled to hit $464 million, ExxonMobil reported a $281 million increase in income attributed to higher refining margins, BP PLC saw a 13 percent climb in the segment and Valero Energy Corp. reported record net income of $248.1 million, bolstered by West Coast gasoline margins of greater than $20 a barrel.
Retail gasoline prices have slipped somewhat to $2.172 from their record high, which the Automobile Club of Southern California reported as $2.233 on April 10. Diesel prices of $2.386 a gallon remain near their record high of $2.399, set April 22, sparking widespread protests from truckers that shut down freeways across Los Angeles on Friday.
The industry’s trade group, the American Petroleum Institute, defended its companies’ record results. Senior policy analyst Rayola Dougher noted that ChevronTexaco outpaced the industry average slightly, but said its margins were not outrageous.
“It’s about 6 cents on the dollar,” she said of the overall industry profit margin. “It’s a perception issue. This is a huge industry; it earns billions of dollars, but it spends billions, too. I think it’s hard for people to get because it’s such a big business.”
Fadel Gheit, senior energy analyst for the New York-based investment bank Oppenheimer & Co., gets it. He owns shares in ChevronTexaco and several other oil companies and follows the stock for Oppenheimer and disagreed with industry attempts to downplay the results.
“They’re doing very well everywhere,” he said. “They’re firing on all cylinders, so they can’t complain. What’s better than record earnings? What’s better than an A+? Chevron hit the ball out of the park. This isn’t even just a grand slam; it’s gone.”
In numerous past investigations of price run-ups, refiners have been proved innocent of charges of illegal price gouging. With gasoline as a deregulated commodity dating back to the Reagan administration, oil companies have been able take advantage of market conditions to enjoy price spikes that come with annual regularity.
“A refiner would call it a renaissance, a customer would call it excess,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. “It’s not manipulative, it’s just drifted to that because of demand. Refiners are the beneficiaries and they’re probably not ashamed of that. There’s nothing collusive there, but if you’re the angry California consumer, you’ll look at this and say, Great, they made money at my expense.”
Contact Brent Hopkins at (818) 713-3738 or [email protected]