Oil Watchdog

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.

Much of the second-quarter jump in profit came from the sale of
a company, not gasoline. Chevron sold its stake in Houston energy
business Dynegy, pumping up profit by $680 million.

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.

BP’s profit rose 1.5 percent to $7.38 billion. Exxon Mobil’s
profit dipped 1 percent but still hit $10.26 billion. Shell jumped 18
percent to reach $8.67 billion for the quarter.

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.
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CHEVRON CORPORATION (San Ramon, CA)

2nd Quarter:
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