Oil Watchdog

Anyone who filled a gas tank this summer might be surprised by what
Chevron Corp. reported Friday: For the first time in years, Chevron
lost money making and selling fuel in the U.S.

A decline in pump prices was partly to blame for the company’s
26% drop in third-quarter profit, which was bigger than Wall Street had
expected. Still, the average price in California was above $3 for a
gallon of self-serve regular gasoline during nearly half of the
quarter.

The San Ramon, Calif.-based oil giant posted net income of $3.7
billion, or $1.75 a share, for the three months ended Sept. 30, down
from $5 billion, or $2.29 a share, a year earlier.

Chevron’s results were lower across the board compared with the
third quarter of 2006, a year that saw record-high profits in much of
the industry. Exxon Mobil Corp., BP and many other major oil companies
reported quarterly earnings that also fell short of the year-earlier
quarter.

Even after lowering expectations for the quarter, analysts were
surprised by Chevron’s results. The company’s net income, which
included $400 million in charges, came in more than 30 cents below the
average estimate of $2.07 a share, according to a survey by Thomson
Financial.

"No one outside of Wall Street can weep for Chevron or any of
the other major oil companies," said Judy Dugan, research director at
Santa Monica-based Foundation for Taxpayer & Consumer Rights. "The
outlandish profits of recent years, almost entirely on the backs of
motorists, allowed them to ignore the long-term sustainability of their
core business."

Dugan said that investments in renewable energy projects by
Chevron and others were dwarfed by what they spent buying back company
stock. Chevron, which recently completed three $5-billion share-buyback
campaigns, launched a $15-billion share repurchase program in
September.

As a group, companies with U.S. refineries suffered a
nationwide pullback in gasoline prices at a time when the cost of crude
oil was heading higher. The gap between retail fuel prices and the cost
of oil was largest on the West Coast, a reversal of fortune for
refiners operating in the normally lucrative California market.

Chevron, which has two refineries in California, said profit at
its worldwide refining and marketing operations fell to $377 million
for the third quarter, down about 74% from the $1.4-billion profit
Chevron collected in the year-earlier period. In the United States,
Chevron’s refining and marketing operations lost $110 million in the
quarter, compared with profit of $831 million in the third quarter of
2006.

The company blamed the U.S. loss on sharply lower profit
margins on the West Coast, a situation exacerbated by expensive oil
imports and a lengthy upgrade project at its plant in El Segundo.

Chevron also tacked on a $50-million charge for environmental
costs and produced less fuel because of a fire at its Pascagoula,
Miss., refinery.

Net income at Chevron’s flagship business of producing and
selling oil and natural gas fell 2% to $3.4 billion. Worldwide
production was the equivalent of 2.6 million barrels a day of oil, a 4%
decline attributed in part to revised operating terms in Venezuela.

Chevron shares fell 56 cents to $88.48 on Friday.
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