Chevron Corp. said high crude oil prices brought on by the Persian Gulf crisis will make the petroleum company's fourth quarter profits so big it is worried about a political backlash.
After Chevron makes a $220 million accounting deduction to reflect the divesture of its fertilizer business, reported earnings will be in the range of $2 per share, or $700 million, Chevron Chairman Ken Derr told reporters."They're going to be high, and they're going to create a lot of flack," Derr said.
In the fourth quarter of 1989, Chevron had declared an $883 million loss after taking a $1.2 billion accounting charge for costs relating to inactive oil fields and environmental cleanups.
Derr called that 1989 period a "horrible quarter" and predicted he soon will see headlines saying "our earnings are up two- to threefold" when comparisons are made.
Derr would not say specifically what kind of fallout he anticipates.
"I'm worried that people will just look at the raw numbers and say there's been profiteering," he said. "There are a lot of anti-oil representatives elected in this country. They are looking for an opportunity to make political rhetoric against the oil companies."
Chevron's profits will be high for the quarter because crude oil prices were about $32 per barrel for the quarter, bringing in lots of cash for the production, or "upstream," end of the business.
At the same time, the refining and marketing, or "downstream," portion of Chevron's business had recovered from losses it suffered early in the Persian Gulf crisis and moved back into the black, Derr said.
In an attempt to defuse any pending attacks, Derr characterized the successful fourth quarter as a one-time event for the San Francisco-based company.
"Although the fourth quarter profits are strong, today we are earning at a significantly lower rate, and I hope we don't end up with a major political problem over a quarter I regard an anomaly," Derr said.
Nonetheless, Derr predicted oil prices will surge should a shooting war develop in the Persian Gulf. He would not say how high they might go or how long they might stay high.
"I think there will be an emotional spike," Derr said.
Oil prices should settle in the $20 to $21 range after the Middle East crisis is resolved, he predicted.