Interview: Energy cost
Sunoco --- C.E.O. --- Jack Drosdick
>> crude oil futures fell today on speculation opec could soon be pumping more oil. prices rose to an eight-week high last week on concern of low inventories and fears that russia’s yukos could go bankrupt. the price today down .6%. also on the oil front today, sunoco capitalizing on the gap between crude oil costs and gasoline prices. in the second quarter, that gap widened to the highest on record and the company’s profit nearly tripled. earlier, brian sullivan spoke% with sunoco’s c.e.o. jack drosdick about energy costs and the outlook for his company.
>> gasoline hab up―has been up quite a bit, 3% to 4%, contributing to our better bottom line and higher gasoline prices.
>> are you surprised the demand has been so strong given the fact that gasoline in much of the country, especially the northeast, is at or above $2 a gallon?
>> we were a bit surprised but i think if you look at last year, it was a rainy year in the northeast and that may have something to do with it. a little bit better driving conditions. but we were surprised by the strong growth in gasoline. we were especially surprised that even the high prices didn’t curb demand.
>> let’s talk about why the prices may be high. is this a demand-driven scenario or a lack of supply-driven scenario for high gas prices?
>> i think it’s a little bit of both. definitely without the demand, we wouldn’t have the kind of results and prices we have but with the tightness in crude supply and refining capacity, all brought on in part by the high demand, we’re just in a very tight situation and when you overlay on that the uncertainty in the middle east and the like, there’s a little bit of price in there for protection against an interruption, either in refineries or in the crude supply.
>> are you optimistic enough in retail gas demand to to be to -- continue to buy up service stations?
>> yes, we are. we’ve been buying up stations in bulk and taking the least profitable stations and selling them to smaller concerns and it’s working well for us.
>> are you going to be at a net add of gas stations this year, selling off weaker-performing ones and buying new ones?
>> absolutely. while selling off the ownership of some of the stations, in all cases so far the stations have stayed with us and continue to sell gasoline. it’s just that we don’t own and operating them, they’re owned and operated by third parties.
>>ure optimistic enough not only about retail gasoline demand but your business in general to boost revenue and e.p.s. estimates at this time?
>> we don’t―we let the analysts look at what our estimates might be. i believe as the analysts look at our results and those to be announced going forward, they’re already optimistic about our businesses but we would hope that as time goes on, they’ll continue to be optimistic and increase their optimism.
>> you can see a time in the next six months when refineries will not be running at 100% capacity?
>> i really can’t. i think the game for refining is to continue to run at maximum capacity, which we were able to do in the last quarter. with these high margins, to look for ways to produce more, which is the good side of the high prices. the high prices will bring on more supply in my mind.
>> that, of course, was the c.e.o. of sunoco speaking with brian sullivan. boise cascade is going to sell assets and change its name to officemax. the company says this completes its transformation from an industrial company into an office products business. its paper and timberland assets will go to slowly--- closely-held boise cascade for $3.7 billion. boise will take the officemax name this fall. officemax is currently the nation’s number three office products retailer behind staples and office depot. shares of tyson food with their biggest drop this year after the company said that earnings this quarter may fall. the world’s largest meat processor says bans on u.s. chicken and beef hurt exports. tyson says fourth-quarter profit will be below the 42 cents a share earned last year. earlier today, tyson said profit last quarter more than doubled from higher prices of chicken and pork. high protein, low carb diets helping boost demand for the meats. shares down 7.4% today. another food company out with earnings today, kellogg, saying that higher sales of low carb cereals drove profit higher. they earned 57 cents a share, three cents better than estimates. shares of kellogg closed higher by 1.3% today and have gained more than 20% in the past year. american express says the economy expanded and so did its profit. we’ll look at the numbers at amex, a member of the dow, up next.
