Posted on March 5, 2010
Richmond not on List of Chevron
R. Baker, Chronicle Staff Writer
Oil giant Chevron Corp. has revealed where it plans to cut
its worldwide refining and marketing operations - and Richmond
is not on the list.
Chevron executives told a gathering of Wall Street analysts
Tuesday that the oil company, America's second-largest, will
lay off 2,000 employees this year from its global "downstream" division,
which makes and sells gasoline. Oil companies have seen their
downstream profits gutted by the recession, as drivers buy
"Downstream market conditions are likely to be difficult for
the next several years," warned Mike Wirth, the company's executive
vice president for worldwide refining and marketing operations.
In response, Chevron plans to sell its refinery in Pembroke,
Wales, and will seek bids for some of its downstream operations
in Europe, the Caribbean and Central America.
But the company made no mention of its refinery in Richmond.
City officials there are trying to raise the refinery's taxes,
and environmentalists have blocked a project to upgrade the
plant's aging equipment.
Chevron executives, including Wirth, had previously hinted
that they might pull out of Richmond if the company didn't
get its way. Critics considered that a bluff.
"That's what we were saying all along - that the likelihood
of them closing the Richmond refinery was very small," said
Richmond Mayor Gayle McLaughlin, who often rails against the
company. [emphasis added]
Chevron representatives would not say how many jobs could
be lost at the company's San Ramon headquarters or its offices
in Houston. Severance packages will cost an estimated $150
million to $200 million in the year's first quarter.
Just a few years ago, refineries were enjoying record profits,
and analysts declared that the industry had entered a "golden
age." Now those same businesses are struggling.
Demand for gasoline and diesel plunged with the recession,
as consumers stopped spending and shipping companies idled
trucks. Today, refiners must pay top dollar for oil, with crude
oil futures trading above $80 on the New York Mercantile Exchange.
But weak gasoline sales prevent the companies from passing
the full cost on to consumers. As difficult as it is for drivers
to believe, refiners have been losing money.
"It's something most of the general public doesn't get," said
Ken Medlock, an energy research fellow at Rice University's
James A. Baker III Institute for Public Policy. "They look
at the price of gasoline, and they think the oil companies
are doing great, but that's not necessarily the case."
Chevron makes most of its money by pumping and selling crude
oil, so the company as a whole remains profitable even when
its refining and marketing operations aren't. In the fourth
quarter of 2009, for example, the company made $3.1 billion
in profit, while its downstream operations lost $613 million.
Refining has always been a cyclical business, and Medlock
predicts that gasoline demand will eventually pick up. But
even as the economy recovers, high gas prices will force many
drivers to cling to the thrifty ways they learned during the
recession, he said. Regular gas costs an average of $2.76 per
gallon nationwide, according to the AAA automotive club. In
California, the average is $3.07.
"We certainly won't see demand grow the way it was when gas
was $1.50," Medlock said.
Richmond city officials said they hope Chevron's planned layoffs
would largely spare the refinery, the city's largest private
employer. But they gave no indication that they would back
down in their disputes with the oil company.
City Councilman Jim Rogers said he will continue to oppose
the refinery's upgrade project until Chevron guarantees that
the changes will not lead to more air pollution. Critics say
the project, which has been frozen by a lawsuit, would allow
the refinery to refine heavier grades of crude oil and create
The company says the grades of crude oil used at the refinery
would stay the same, although the changes would allow the plant
to process larger amounts of the heaviest grades already in
"I don't think it's Chevron-bashing to insist - absolutely
insist - that they don't make the air dirtier," Rogers said.
"I certainly don't want the refinery to close," he added. "I'm
certainly gratified that it doesn't look like that's happening
at this point."
E-mail David R. Baker at email@example.com.
This article appeared on page D - 1 of the
San Francisco Chronicle