Chevron Chief Denies Firm Making ‘Windfall Profits’
Rising oil prices will give Chevron Corp. a better first financial quarter this year than last, but not the “windfall profits” alleged by some industry critics, Chief Executive Office David O’Reilly said Thursday.
“There is no doubt that the first quarter of this year will be better for Chevron,” O’Reilly said, saying the improvement would be particularly evident over the first quarter of 1999, when profits were reeling as oil prices sank to the lowest level in more than a decade.
O’Reilly did not provide specifics, but he did reject the idea floated by some California state lawmakers that oil companies were gouging consumers and should be subjected to a windfall profits tax.
“I’m not sure where this idea comes from,” O’Reilly told a meeting of the Commonwealth Club. "(A windfall tax) is counterintuitive. You increase the taxes, you increase the cost,” he said. “The marketplace will correct this problem.”
State Sen. John Burton advanced the windfall profit tax notion this month, citing figures from the California Energy Commission which indicated oil refining companies were able to pocket almost all of an average 34-cent-per-gallon increase in state gasoline prices between Feb. 14 and March 13.
Chevron, the No. 2 U.S. oil company, said in January that its fourth-quarter earnings rose 63% on the strength of oil prices that have nearly doubled from a year ago, offsetting a weaker-than-expected performance by its refining and marketing operations.
The integrated oil company said earnings excluding special items rose to $819 million, or $1.24 per diluted share, from $503 million, or 76 cents, a year earlier.
O’Reilly, while confirming that earnings were likely to remain on the upswing, said the company was still likely to see weakness in refining and marketing. “You’ve got to look at the whole picture,” he said.
Chevron shares rose $3.69 to close at $92.19 on the New York Stock Exchange.