Watch out. The upcoming quarterly financial reports by American petroleum companies are likely to be dandies.
Last week, the American Petroleum Institute sent a notice to newspaper editors noting that these financial reports are due to come out over the next several weeks and will cover the third quarter of 1990. This just happens to cover part of the time prior to and following the Iraqi invasion of Kuwait, after which the price of crude oil started to climb.
The API report points out that "these reports will be reviewed in light of recent increases in the price of crude oil caused by market reaction to the crisis in the Persian Gulf."
The news release stresses that quarterly statements can and do vary, company by company, reflecting the diversity of the industry. The report also points out it is reasonable to expect companies with greater investments in exploration and production to fare better than those with greater investments in refining and marketing. The API report also cautions that no third quarter earnings should be viewed as representative of the oil industry's profitability. "Profitability should be considered both over time and in comparison with other manufacturing industries."
Thus, with the warning not to think of the upcoming financial statements as that representative of the entire oil industry and the inference that any substantial gains in a company's earnings in the third quarter should not be considered as representative of the entire business, it looks like some of the oil companies are going to report some mighty healthy revenue and profit figures. And if this is the case for the third quarter, imagine what they are going to be for the current fourth quarter.
Any time an industry starts explaining and justifying upcoming financial reports, it would seem industry officials are mighty concerned about what the figures are going to show and the public's reaction. This is particularly true when the cost of gasoline, heating fuel, propane gas and most other products using petroleum components in their production all are reaching new high cost levels.
Get ready for some big earnings reports by the American oil companies. And get ready for many explanations of why these earnings are justified and not a result of price gouging.