09-26-07 by dugan
Lots of folks have sent along a Financial Times report that BP’s CEO sees its third-quarter performance as "dreadful." (Here’s a later recap from the Guardian, with updates). BP CEO Tony Hayward tried to blame some of the bad outlook on lower refining profits, but other analysts say in a CNN story the drop is only enough to keep industrywide refining from setting another quarterly record for the first time since 2002. Frankly, it’s about time. Too bad it didn’t last longer and go deeper.
BP is its own story. Chevron and Exxon are making happy signals about the third quarter, rolling in profits from higher oil prices even as refining profits and fuel prices evened out for a few months (Pump prices are back up, slowly rising nationally and shooting up 17 cents over the last three weeks in California.) Chevron today announced a $15-billion buyback of its own stock, because it would rather pay off investors than expand refining capacity. Exxon, also wallowing in cash, is buying back $7 billion each quarter of its own stock.
All that Bumbling Petroleum has proved is that even a giant vertically integrated profit machine can be "dreadfully" managed and make a neglected mess of its infrastructure. As luck had it, even BP’s much-criticized $500 million grant deal with UC Berkeley came under indirect (fictional) attack last night on ABC’s "Boston General," in an episode that was more about Stanford’s industry-controlled $100-million deal with Exxon.
The CNN story about refining profits came with the headline, "Oil Refiners Falter." No, a slight retreat from six years of steady profiteering on the backs of motorists is not "faltering." It’s not even back to the level of "fair."
The soaring price of oil is a separate and even more complicated issue, driven as much by speculators and even the price of gasoline as by supply, weather or geopolitics. But as testimony at a Commodities Futures Trading Commission hearing recently noted, the one sure thing about heavy futures speculation is that multiple trades of a commodity drive the actual product price up–and up–and up, aside from the occasional crash. At this point, no one can even say what the "real" price of oil should be.