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Gulf War boosts oil company profits

By
GEORGE LOBSENZ

WASHINGTON -- The huge fuel demands of Operation Desert Storm fattened profits for the nation's 18 major oil companies in the first three months of 1991, with income rising 18 percent above 1990 levels, federal analysts said.

The increased profits were largely due to the companies' refining and marketing operations, which benefited from the dramatic decline in crude oil prices in early 1991 as well as the surge in war-related demand for jet fuel and other refined products, the Energy Information Administration said Friday.

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The same two factors helped independent refiners achieve a 179 percent increase in profits.

Refinery operators saw their acquisition costs for oil fall by 36 percent from December due to the decreased crude prices. At the same time, demand for refined product was enhanced by Operation Desert Storm, an unusually cold winter in Europe and the shutdown of refineries in Kuwait, Mexico, Venezuela and Brazil.

As a result, refinery profit margins soared, with income from the oil companies' foreign refining and marketing operations shooting up 258 percent over 1990 and similar domestic activities registering a 254 percent hike.

Chevron, Exxon, Mobil and Texaco accounted for most of the increased profits from foreign refining and marketing, said the EIA, which noted all those companies have big refineries in Singapore or elsewhere in the Far East.

'The petroleum needs of Operation Desert Storm and the continued outage of Kuwaiti refineries pushed Singapore (profit) margins significantly higher,' the EIA said. 'Demand for jet fuel and distillates was especially high due to the petroleum requirements of the allied forces.'

The 18 percent increase in profits represented a big drop from the fourth quarter of 1990, when the big oil companies registered a 77 percent profit increase due to sky-high crude prices.

Crude prices were driven up by the crisis in the Persian Gulf, but then plunged after the quick success of Operation Desert Storm starting in mid-January.

The sharp dropoff in crude prices hurt independent oil and gas producers as well as production operations within the major oil companies.

Independent producers experienced an 8 percent drop in first-quarter 1991 profits compared to the same period in 1990, and even that did not provide a true measure of their distress, the EIA said.

The agency said the overall picture for independent producers would have looked much worse but for improved performance by two major independents, Maxus and Union Texas Petroleum, both of which enjoyed highly profits from their overseas operations. Without those two companies, independents registered a 20 percent drop in early 1991 profits.

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