Oil companies maintain high profits
Stacey Vanek Smith: Later today, Chevron will tell us how much money it made in the last three months. Big oil has been racking in the cash this quarter. Still, with oil prices as high as they are, those profits were expected to be even higher. What’s holding them back — let’s just say a lack of refinement.
Bob Moon has more.
Bob Moon: When it comes to putting enough crude together to actually make gasoline, the big oil companies have to play the market, too. Stephen Schork watches the industry at Energy Market Intelligence.
Stephen Schork: The refiners have to buy that oil, and they can’t necessarily always transfer that high cost of crude oil into the retail market on a consistent basis.
That’s because if the cost of gasoline goes too high and we buy less, the refiners can’t recoup what they paid for the crude. At the industry consulting group EISA, Sander Cohan says it’s a risky business.
Sandar Cohan: What happens is that, oftentimes when demand is not very strong, is that they get caught in the middle so that they end up being not very profitable.
In recent weeks, several companies — including Conoco-Phillips, Marathon and Murphy — have decided the best way out of that frequent drag on their profits is to either spin off or unload their refining operations.
Cohan: In separating those two businesses, what they’re trying to do it free up capital to pursue what could be more lucrative crude drilling projects.
Analyst Stephen Schork puts it more directly: Oil companies would rather drill for steady profits — because they see no let up in demand for crude.
I’m Bob Moon for Marketplace.
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