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Chevron Notches Record 1st Qtr | Oil Watchdog

Chevron Notches Record 1st Qtr

Sat, May 3, 2008 at 10:31 am

    Chevron Notches Record 1st Qtr

    Chevron Notches Record First-Quarter Profit

    The same high oil prices that are taking a
    bite out of the economy brought Chevron Corp. its biggest first-quarter
    profit ever, a $5.17 billion record that will likely add to the public
    outcry over fuel costs.

    San Ramon’s Chevron reported Friday that its profit jumped nearly 10
    percent compared with the same period last year, driven higher by oil
    prices that smashed decades-old records and kept climbing. The
    company’s sales rose 37 percent to $65.9 billion.

    Chevron’s financial report capped a week in which the largest
    international oil companies all announced soaring profits: $10.9
    billion for Exxon Mobil, $9.08 billion for Shell and $7.6 billion for
    BP.

    Most of that profit came from pumping and selling crude oil, not gasoline.

    As hard as it is for drivers to believe, the prices they pay at the
    gas pump have not risen as far or as fast as crude oil. Chevron made $4
    million refining and selling gasoline in the United States during the
    first quarter, down almost 99 percent from the same period last year.
    During the previous two quarters, the company actually lost money
    making gas.

    But that fact hasn’t blunted public anger toward oil companies at a
    time when gas costs an average of $3.62 per gallon nationwide and $3.92
    in California. Politicians and consumer advocates seized on this week’s
    profit reports to call for increasing taxes on oil companies or
    revoking tax breaks they received in the past.

    "President Bush and Congress must act immediately and take the
    obvious steps to end the crisis that threatens not only every consumer
    but our entire economy," said John Simpson, a consumer advocate with
    the nonprofit group Consumer Watchdog, which frequently criticizes oil
    companies.

    Chevron spokesman Don Campbell said additional taxes wouldn’t lower
    oil prices. He noted that the company spent $5 billion during the first
    quarter on finding and developing new oil fields – almost as much money
    as the company’s profit.

    "Increasing taxes at a time when more supplies are needed in the
    marketplace will take money away from those projects," he said. "We
    think it’s bad policy."

    Indeed, Chevron and all the major oil companies are struggling to
    increase the amount of oil and natural gas they pump. Chevron’s
    production slipped about 1.7 percent during the year’s first quarter,
    in part because many of the company’s oil field development contracts
    in foreign countries give those countries a greater share of the oil
    whenever prices rise.

    "At higher oil prices, more goes to the national oil companies,"
    said Justin Perucki, an analyst with the Morningstar financial research
    firm. "If you just look at the quantity it looks bad, but remember,
    they’re getting more money for the barrels they do keep."

    Oil prices, however, have been rising so quickly that gasoline prices haven’t quite kept up.

    Drivers have been cutting back on the amount they buy, with U.S.
    sales of Chevron gasoline falling 3 percent in the first quarter. That
    makes it hard for the company to pass along the full increase in the
    cost of crude oil. Profit margins at gasoline refineries have shriveled
    as a result, falling by roughly a third on the West Coast compared with
    the first quarter of 2007.

    But that situation won’t last forever. Analysts say that if oil
    prices stabilize, Chevron should be able to increase its profit margin
    on gasoline by slowly raising gas prices, making drivers pay more than
    they already do. That process will be easier if gasoline demand
    increases this summer the way it usually does, as Americans drive off
    on vacation.

    Chevron also could start making bigger profits from gasoline if the
    price of oil drops dramatically. But that hasn’t happened in months.

    "Either gas prices will have to go up, or oil prices will have to go
    down," said Philip Weiss, an analyst at Argus Research. "It’s got to be
    one or the other."

    CHEVRON CORP. (San Ramon)
    1st Quarter 2008 2007

    Revenue

    $65,946,000,000

    $48,227,000,000

    Net profit

    $5,168,000,000

    $4,715,000,000

    Share earnings

    $2.48

    $2.18

    E-mail David R. Baker at dbaker@sfchronicle.com.

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