CRISIS IN THE PERSIAN GULF : Chevron’s Chief on the Hot Seat : Energy: Kenneth T. Derr appears on a radio talk show in San Francisco to soothe consumer anger over rising gasoline prices. The callers are surprisingly mild in their complaints.
Kenneth T. Derr, Chevron Corp.’s no-nonsense chairman and chief executive, rolled up the sleeves of his white shirt Monday morning and threw himself to the lions.
In a small booth at radio station KGO-AM, he spent an hour fielding questions on a call-in show to try to defuse some of the negative publicity oil firms have gotten for jacking up gasoline prices in the wake of Iraq’s invasion of Kuwait almost two weeks ago.
For Bay Area listeners, here it was. A golden opportunity to orally tear into the head honcho of one of those greedy, price-gouging oil companies. So what did they do? They growled but did not bite.
One caller asked about safety at the company’s refineries. Another accused Chevron of trying to drive independent dealers out of business by not selling them gasoline. One Fremont woman’s suggestion that oil company executives be jailed on general principles was about as nasty as it got.
To get the ball rolling, talk-show host Ronn Owens cited a poll in the latest issue of Newsweek magazine indicating that 93% of those Americans surveyed believed that oil companies were taking advantage of upset in the Middle East by raising prices unfairly.
“I am well aware that our customers are upset, and to some extent that may be our fault,” Derr responded as the 9 a.m. program began. “We may not have communicated . . . well” the reasons why prices at the pump vaulted up after Iraqi strongman Saddam Hussein launched his surprise attack.
Oil industry observers contend that refiners and distributors initially got themselves into a public relations quagmire by offering complex explanations of the way the oil market works. When that strategy failed, some oil companies looked around for a new way to get in the public’s good graces.
Atlantic Richfield Co., based in Los Angeles, last week agreed to freeze prices to dealers temporarily at the behest of President Bush. Others, Chevron not included, followed suit. Mobil ran newspaper ads showing the run-up in crude oil and gasoline prices.
But Chevron, widely regarded as the most forthcoming of the big oil firms, so far has been the only one to put its chief executive in such a public hot seat.
Derr gamely took a shot at giving his unseen audience a quick lesson in oil economics. He explained that crude oil prices had risen by $3 a barrel even before the Iraqi invasion. Afterward, prices immediately shot up another $3.
As a result of those boosts, he said, Chevron’s raw material costs have risen about 15 cents a gallon in recent weeks, whereas the company’s price to dealers has gone up 5 to 8 cents.
“We are under-recovering . . . the increases in raw material costs,” Derr said.
He added that Californians have experienced the additional blow caused by the onset of a voter-approved, 5-cent-a-gallon tax on Aug. 1.
Of half a dozen callers who got through on the program, a couple asked about Chevron’s efforts to develop alternative sources of oil. Derr pointed out Chevron’s long-standing lobbying to get public and congressional support for offshore exploration, an emotional issue in California.
He criticized the California Coastal Commission for revoking a county permit for Chevron to transport oil by tanker from its Point Arguello field off Santa Barbara after the 1989 Exxon Valdez oil spill in Alaska.
Overall, Derr noted, the nation relies on foreign sources for about half of its crude oil needs.
When Owens voiced a sentiment apparently shared by millions of Americans that oil companies are profiteering from the crisis, Derr replied that, indeed, those companies in the business of simply selling crude stand to gain from higher crude prices.
But, he added, “we’re a net buyer of crude. Under-recovery in the downstream (at the pump) will not be offset.”
Declining Owens’ offer to gaze into a crystal ball to let Bay Area motorists know what might lie ahead, Derr closed the program by saying: “I refuse to forecast what will happen in the next seven days.”
