Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, February 15, 1991                   TAG: 9102150670
SECTION: BUSINESS                    PAGE: B-5   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

EARNINGS SURGE AT OIL COMPANIES

According to the government's figures, the 14 major U.S. oil companies earned nearly $5 billion from oil and gas production in the fourth quarter, about 150 percent more than in the final three months of 1989.

"The greatest gains in profitability were directly tied to high [crude] prices," the report said. "For major petroleum companies income from U.S. oil and gas production nearly tripled while their income from foreign oil and gas production more than doubled."

But, the Energy Department reported there was no evidence of price gouging by the companies.

The companies' "greatest gains in profitability were directly tied" to the sharp increases in crude oil prices that occurred in the months after the Iraqi invasion of Kuwait on Aug. 2, the report said.

The report noted that in recent months oil prices have been declining and because of a supply glut may fall more when fighting stops in the Persian Gulf.

"If that is true, the sharp increase in oil and gas profitability will be transitory," said the report by the department's Energy Information Administration.

The governemnt report did not break down earnings by individual companies.

"You had the results that you would have expected with the rise in crude prices [after the Persian Gulf crisis] and the significant retail margins that existed. That's where the money was made - in production and retail," said Calvin Kent, head of the Energy Information Administration.

However, Edwin Rothschild, an energy expert for Public Citizen, a Washington-based consumer advocacy group, said the findings were "a clear indication that windfalls were made" by the oil companies.

"Consumers were taken for a ride," said Rothschild.

As was true in the third quarter, producing companies did especially well while independent refiners did poorly. The refiners could not raise prices for their products fast enough to keep pace with the rising cost of the crude oil they had to buy from producers.

Profits for the independent refiners fell 54 percent during the last three months of the year. Profits from refining at major companies declined by 7 percent.

These declines were because overall the price of oil products, "decreased more rapidly than did crude oil prices" from their early fall peak and motorists shifted away from high-octane gasoline where traditionally the greatest margins exist, the report said.

At the same time, biggest profit gains came to the handful of independent oil producers, who are not involved in either refining or retail sales. Their profits soared by nearly 400 percent during the quarter, the government said. The U.S. government report did not break down earnings by individual companies.

On average, crude oil prices were $11 a barrel higher during the quarter compared with a year earlier, reaching a peak of just more than $40 per 42-gallon barrel in mid-October, the government said.

In July, before the invasion of Kuwait sent nervous oil buyers into world markets to build inventories, crude prices were a little more than $21 a barrel, the report said. Since October they have declined to a little more than $22 a barrel.