Refinery says profits are in line with business here
By Sean Hao
Advertiser Staff Writer
ChevronTexaco Corp. went on the offensive yesterday to stop Hawai'i from imposing the nation's only gasoline price cap, scheduled to take effect July 1.
The second largest U.S. energy company said its profits from Hawai'i operations are in line with the amount of business it does here and, for the first time, provided data to back up that contention.
ChevronTexaco said its Hawai'i business contributed 4 percent to 5 percent to the company's national refining and marketing profits in the past five years, only slightly more than the 3 percent to 4 percent that Hawai'i contributes to national refining volume.
ChevronTexaco, which operates one of the state's two oil refineries, hopes the fresh numbers will counter its image of charging more in Hawai'i than on the Mainland to drive up profits. That image was created in part by a 1998 state lawsuit that said ChevronTexaco's Hawai'i operations generated 22 percent of national dealer profits on just 3 percent of sales.
"It comes down to: Who are you going to believe — the attorney general's office, which conducted a four-year investigation, or the oil companies who have a vested interest in derailing this legislation?" said Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of the gasoline price-cap law.
ChevronTexaco, in written testimony to a House committee considering changes to the gas cap law, said: "The truth is the 3 and 22 (percent) mantra is misleading. The truth is, it's 4 and 4."
How ChevronTexaco's disclosure, which lacked specific profit and sales figures, will affect the gas cap debate is unclear, though determining whether oil companies make windfall profits in Hawai'i remains a central issue. Lawmakers yesterday postponed a decision on whether to push ahead with amendments to the price caps until tomorrow. They are considering changing the formula for setting prices after an attempt to delay the price cap for another year failed.
Consumer viewpoint
For many consumers, the issue of whether profits are excessive is less important than finding the quickest way to bring prices down.
"The gas prices are ridiculous," said Bobby Mendoza of Waipahu as he filled his 1996 Jeep Cherokee at the Pi'ikoi Chevron.
"If they could bring it down (through price caps), they should bring it down."
Mykel Cabuhat of Kapolei, a construction worker who pumps $200 worth of gas into his 4-cylinder Mazda every month, said he favors gas price caps. "Gas prices are too high. It's hard to make (enough) money just to buy gas," Cabuhat said.
ChevronTexaco blamed itself for the image that it is overcharging in Hawai'i.
"Unfortunately our lack of response has allowed this mistaken belief to take root and now it has blossomed into flawed legislation," the company said in its testimony.
While acknowledging that retail gasoline prices in Hawai'i are "usually somewhat higher" than in other markets, ChevronTexaco said that is because of the state's relatively low-volume gasoline market, which is subject to higher than usual operating costs. The company also pegged high prices to the state's high taxes, "excessive" regulations and inflexible demand for gasoline.
Sen. Menor maintained that ChevronTexaco's figures disclosed during the state's antitrust lawsuit remain a better indicator of the company's high profitability than today's figures.
"I'm not surprised they would submit this kind of testimony," he said.
Looks like $21.7 million profit
Although ChevronTexaco didn't release exact profit figures for its Hawai'i business, when the percentages provided are applied to the company's 2003 results, they suggest the company made about $21.7 million in the state.
That is in line with an outside assessment done for the state by Irvine, Calif.-based Stillwater Associates, which estimated after-tax profits of ChevronTexaco Hawai'i at $25 million a year.
Frank Young, president of the Hawaii Automotive Repair and Gasoline Dealers Association, who is a vocal advocate for a price cap, said the profit figures released by ChevronTexaco don't mean much without supporting evidence.
"There's no way to tell (their accuracy) without looking at the books," Young said. ChevronTexaco "buys (crude) oil from itself, so we don't know what they're paying for the oil."
ChevronTexaco said it released the numbers because it is time to "set the record straight," according to spokesman Albert Chee.
"Clearly, we stand behind these numbers," Chee said.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
Correction: Chevron Hawaii and Tesoro Hawaii operate the state's only refineries. Tesoro's refinery is the larger of the two. A previous version of this story contained incorrect information.
