Chevron Press Release - Chevron Chairman At Annual Stockholders Meeting Decries "Fundamental Misconception"
SAN FRANCISCO, May 7, 1996 -- A convergence of market forces led to recent gasoline price increases, Chevron Chairman Ken Derr told stockholders gathered today for the company's annual meeting.
Derr defended the petroleum industry against the "fundamental misconception" of price gouging, saying the temporary rise resulted from "four separate, but understandable, events that came together and sent prices up -- the combination of short supply and increased demand, higher crude oil prices, higher manufacturing costs and higher taxes."
The U.S. refining and marketing industry remains highly competitive, Derr said, noting that Chevron's first quarter return on capital in this business was only about 1 percent. "If prices had just kept pace with inflation since 1981, gasoline now would cost more than $2.25 per gallon," Derr added. He predicted that the current "price spike" will be corrected by the balancing forces of the marketplace.
Derr's comments were part of his summary of company operations that included important progress on many fronts, including exceptional 1995 financial results from international exploration and production and from Chevron Chemical Company. He also called 1995 an "outstanding year" for adding oil and gas reserves; the company replaced 138 percent of its production with new reserves.
Derr praised employees for their improvement in Chevron's safety record. "During the past two years, we've cut our rate of incidents nearly in half," Derr said. "Not only does this save money, but -- more important -- it also reduces the pain and suffering that accompany personal injuries. This shows that when employees focus on an important goal, they can make things happen."
Discussing the company's financial results, Derr reasserted Chevron's goal of achieving the highest total stockholder return among key competitors in the five years from 1994 through 1998 -- an achievement the company attained in the period 1989 through 1993. For 1995, operating earnings, which exclude special items or accounting adjustments, were up 17 percent to nearly $2 billion. Despite the poor showing in U.S. refining and marketing, Chevron's overall first quarter in 1996 produced operating earnings 56 percent above the first quarter of 1995.
Vice chairman Jim Sullivan, commenting on worldwide operations, noted that Chevron is more global than ever, with business interests in 95 nations -- including oil and gas operations in 25 countries. He highlighted a few recent developments, including:
- An alliance with McDonald's in 12 Western and Southwestern states that will provide customers with both quality fuel and food;
- The $1 billion upgrade of California refineries that has given Chevron a leadership position in a new generation of cleaner-burning gasolines that are expected to reduce auto emissions 15 percent;
- An innovative alliance with Venezuela to operate the Boscan oil field, one of the largest "heavy" oil fields in the world;
- Chevron's oil production in the British North Sea, which continues to grow, with 100,000 barrel-per-day production rates expected by the end of the year;
- Africa, where production increases and exploration prospects are providing a bright future for Chevron in Angola, Congo, and Nigeria;
- Kazakhstan, where oil production is nearing 100,000 barrels per day and the company recently signed a joint-protocol for a 15 percent interest in an oil export pipeline that will allow Tengiz oil field production to be greatly increased;
Both Derr and Sullivan concluded their remarks by thanking Chevron employees for another outstanding year of hard work, and as Sullivan said, "not just hard work -- excellent work."
Updated: May 1996