Industry Chiefs Optimistic Despite Tumbling Oil Prices
NEW ORLEANS (AP) _ Crude oil refineries should be profitable through this year if crude oil prices stablilize, the president of Tenneco Oil Processing & Marketing says.
Tenneco president Ralph S. Cunningham made his comments Monday in a speech to the American Institute of Chemical Engineers meeting in New Orleans.
He said refiners’ profit margins were squeezed by the recent drop in world oil prices. But Cunningham noted that the price of oil products, such as gasoline and heating oil, fell faster than the price of crude, thus causing the profit squeeze.
″It has taken the better part of two months to see a turn in the downward spiral of margin,″ he said.
Refiners can earn a profit when the are able to sell oil products at prices higher than their raw material or crude oil costs.
When the prices of oil and oil products began to fall in tandem, refiners began to make money, he explained.
He predicted that profit margins for domestic refining and marketing industries will remain ″very slim″ for the immediate future.
″Long term refining profits should not be directly affected by crude oil prices as long as they are stable,″ he said. ″But a volatile market causes refining margins to be badly squeezed whether crude oil prices are falling or rising.″
Prices could dip more this summer and rise some in the fall, he said, but oil but won’t rise to $20 a barrel before the end of the year, he predicted.
″I could see a situation where we could become more dependent on foreign oil with prices so low,″ Cunningham said at a news conference.
Cunningham was joined by retired Exxon Chemical Co. President Edwin Holmer and other industry experts at the institute’s convention.
″The value of the U.S. dollar has dropped and should be beneficial in reducing the flow of imports, which have increased 72 percent over the last six years,″ Holmer said. ″The petrochemical industry is growing at 3 percent. It’s very favorable.″