Something funny about those oil company profits
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Something funny about those oil company profits
Posted 2 August 2013 in
It’s no surprise that the big oil companies continue to bring in enormous profits while gas prices soar — our friends at the Renewable Fuel Association were even more surprised when they looked into where some of these profits are coming from. If you only listened to the American Petroleum Institute, you’d think that RIN credits and renewable fuel are hurting their bottom line. But if you listen to the oil companies themselves on their earnings reports, it turns out they’re actually benefiting from RIN values in some cases. That’s right – the industry is using its muscle to attack a policy that attempts to break the oil monopoly, while making money from the policy itself.
Let’s examine a few of these firms (see the full post from RFA for citations):
BP
With respect to RINs, BP told analysts and investors that the company is “…quite well positioned in the short term. We’re net long RINs. We’ve been able to trade into this spike recently and done quite well out of it. I’m very pleased about that.” According to Reuters, “BP also blends a fair amount of ethanol with gasoline at its terminals on the U.S. East Coast and Gulf Coast, which generates RINs…”
ExxonMobil
The nation’s largest refiner stated during its earnings call that RINs have had little or no effect on the company’s financials. “We are a net purchaser of RINs, but I will tell you we are pretty well balanced. We do generate the majority of our credits by blending our biofuels directly. …it’s not real significant,” said David Rosenthal, Vice President of Investor Relations & Secretary. When asked by an analyst if RINs had any material impact on ExxonMobil’s quarterly financial performance, Rosenthal replied, “No, not at all.”
Phillips66
Phillips66 CFO Greg Maxwell reported that RINs have not necessarily affected strong refining margins or refinery runs: “…with the market cracks where they are, they’re still encouraging high run rates.” Maxwell also noted that while RINs may represent a cost for Phillips66’s refining business, they are a profit for the company’s blending and marketing business. “All of the RINs that are generating through our blending activities show up as a benefit in Marketing and Specialties, and then the cost of those RINs or the value, if you will, are transferred over to Refining.” As noted by OPIS, “…the company operates on both ends, getting RINs from blending through its terminal systems and buying RINs when it sells unblended gasoline.” OPIS further reported that Executive Vice President Tim Taylor said “…the company may increase [biofuel] blending to reduce its RIN exposure.”
Hess Corporation
According to Chief Financial Officer John Rielly, “Our retail and terminal networks generate more renewable credits than we require to meet our supply needs. We’re generating around $20-million/month of excess RINs. [For the third quarter] if you were to take the current pricing in place right now and say you sold all the RINs at that price, you could expect us to record an after-tax benefit of $35-40 million.” Rielly also stated that “…the cost of RINs rising in recent months has led to some RIN sharing at wholesale levels, which is reducing our retail fuel margins and offsetting some of the direct benefit from selling the excess RINs.” This means Hess is passing along some of the value of the RIN to customers.
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