news for the oil companies, considering their steady decline in chemical Key points of Carter's war on inflation profits during recent quarters. For example, in this year's second quarBudgetary policy: Federal spending's latory Council to develop calendar of ter, chemical earnings of oil comshare of gross national product cut to major, proposed government regulapanies dropped 2% from year-earlier 21 % and the federal deficit cut to $30 tions, including information on costs, levels, for the first quarter they debillion in 1980. objectives, necessity. clined 4%, and for fourth-quarter Pay standards: Annual increases in Government purchases: Contracts 1977 they decreased 26% from private wages and fringe benefits not to limited, where feasible, to firms obfourth-quarter 1976. exceed 7%. serving pay and price standards; firms Because most of the oil companies' awarded contracts in excess of $5 milchemical investment is in petroPrice standards: Individual firms to limit lion must certify they meet the stanchemicals, which are burdened with price increases over the next year to dards. excess production capacity, earnings one-half of one percentage point below from these depressed products are their average annual rate of price in- Compliance incentives: Increases in creases during 1976-77. excess of the standard could lead to not what the industry hopes for. relaxing of import restriction on comGulf Oil is a prime example. Its Federal workers: Wage increases limpeting products, modification of existing earnings in the third quarter inited to 5.5 %; agencies to fill only one of regulations that set minimum levels creased 7% to $208 million from $195 every two vacancies that occur. for prices or wages in specific situamillion in third-quarter 1977. HowWage insurance: Workers who are tions. ever, earnings from chemical operamembers of groups that meet the pay Monitoring: Council on Wage & Price tions decreased 50% to $7 million in standard would receive a tax rebate this year's third quarter. Total sales Stability will monitor on regular basis equal to the difference between the at Gulf were $5.08 billion in the third wage and price developments of firms annual rate of inflation and 7%, multiwhose annual sales exceed $500 million quarter, an increase of about 6% from plied by an individual worker's pay. as well as major collective bargaining the same period last year. The third Regulatory policy: New federal Regu- settlements. quarter at Gulf shows an improvement in total corporate figures, but not for chemicals. Mobil Oil's chemical earnings equal or greater value. Groups of private sector appear to be positive workers who adhere to the wage moves toward a balanced program to dropped in the third quarter to $55 million from $59 million in last year's standard would, under the Carter reduce inflation." plan, be eligible for a tax credit if the Even so, disbelief is still the third quarter. Overall, Mobil's earnrate of inflation is above 7%. However, underlying industry stance on the ings gained 8.5% to $259 million in the Congress will have to pass legislation chances of the new anti-inflation quarter from $239 million last year. implementing the tax credit. program. In a more negative state- Total third-quarter sales increased On prices, Carter is asking indi- ment than from other companies, 7.1% to $9.1 billion. vidual firms to limit their cumulative Union Carbide chairman William S. Exxon had the worst total earnings price increases over the next year to Sneath says, "The use of wage and performance of any of the major oil one-half of one percentage point price guidelines to combat inflation is companies surveyed. Its net income below the firm's average annual rate unwieldy, discriminatory, and, even in the third quarter dropped 15% to of price increases during 1976-77. To worse, has in the past usually proven $540 million from $635 million in the compensate for any inequities that to be little more than a way station to third quarter last year. However, might arise from some industries outright wage and price controls." • earnings from chemicals increased to having experienced abnormally high 14% to $66 million. rates of price increases while others Phillip's 10% earnings decline were subjected to a depressed market Chemical earnings rise brought profits to $107.8 million, of condition, the Administration will not which chemicals contributed $52.1 require price increases to be less than for oil companies million, down 2% from last year's 1.5%, but also will not allow them to third quarter. be more than 9.5%. One of the bright spots in the oil Based on third-quarter results, oil Firms unable to meet the price companies' earnings from chemical industry was Continental Oil; its standard because of unavoidable cost operations have increased a little third-quarter earnings gained 30.6% increases must demonstrate, as an from last year's third quarter, but to $105.8 million from a restated $81 alternative, that their before-tax they're still not back up to 1976 lev- million in third-quarter 1977. Earnings from chemicals reached $15.9 profit margins are no higher than in els. the best two of the past three years. Total earnings, too, rose for most million, 66% more than last year's $9.6 This provision will not affect the oil companies in the third quarter. million. At least part of this imleading chemical companies, whose However, for a group of six oil firms provement was attributed to more price structures are being held by stiff regularly surveyed by C&EN, in- favorable foreign currency translacompetition below available limits cluding some of the largest, combined tions. under the new price guidelines. Standard Oil's (Ind.) earnings in earnings fell 1.2% from third-quarter Perhaps for this reason, chemical 1977. This weighted average was the third quarter were up 3.4% to companies felt free to praise what largely dragged down by earnings $821.7 million. Chemical earnings they liked in President Carter's pro- declines at two major companies— were up 2.4% to $47.1 million. gram and kept criticism diplomatic. 15% at Exxon and 10% at Phillips Overall, earnings from the chemical For example, Monsanto's official re- Petroleum. This group also includes operations of the oil industry are still action concludes, "In principle, we Gulf Oil, Mobil Oil, Standard Oil none too good. Most companies note support the President's efforts. Re- (Ind.), and Continental Oil. that higher chemical sales are largely ducing government spending, easing Chemical earnings for these com- offset by higher production costs. the impact of unnecessary regulation, panies nevertheless increased about This situation likely will continue for and voluntary restraints upon the 1.4% in the third quarter. This is good the next few quarters. • Oct. 30, 1978 C&EN 7
