CVX, and Big Oil in general, could be approaching the end of an era. The news of the Chevron (CVX) stock buyback program not too long ago has been undone by an announcement that third quarter profits are not going to be in line with profits seen earlier this year. This, of course, is resulting in a lower stock price today. MarketWatch reports on the Chevron's expected third quarter earnings:
Drawing on preliminary numbers for the first two months of the quarter, Chevron blamed the weaker results on 'a sharp decline in refined product margins for the downstream business and the impact of non-recurring items.'
Big Oil seems reluctant to let gas prices rise with oil prices these last few weeks and this is cutting into margins. Additionally, refinery shutdowns and profits from other business interests continue to cut into Big Oil earnings, especially in companies like Chevron.
To me, though, one of the most telling phrases was the look at "non-recurring items." I'm sure that Chevron didn't mean oil, but it does fit. Eventually, oil reserves will be depleted. Fossil fuels are not renewable natural resources. Another thing to keep in mind is that even if oil reserves aren't depleted in our lifetime, the countries on which we rely for oil are becoming more unstable and more hostile towards America.
Keeping gas prices somewhat stable for now may be easing the recent fervor over clean technology and alternative energy, but at some point Big Oil will need to up prices to keep in line with costs. And this could mean a switch that brings even more investors to renewable energy. The point is, of course, that a non-renewable product that it difficult to get to market won't always remain the choice of investors if alternative energy shows an easier and less expensive move to market (a few years down the road, I grant you). On top of which, Big Oil can't rely on government subsidies forever; at some point those will shift as politicians and the American people do. Probably to alternative energy.
Disclosure: I do not own any Big Oil stocks.