Who fits into "Big Oil"? Losses at Sunoco raise the question

Is Anadarko or Devon part of Big Oil? It's doubtful anybody thinks so, but given that they are 100% upstream, their profits will probably be eye-popping. However, the CEO of Anadarko is probably not going to be hauled before Congress to testify soon; they don't have their name on gas stations.

That leaves retailers like Sunoco in the spotlight. At the company's annual meeting May 1 in Philadelphia, a shareholder asked CEO John Drosdick why US gasoline retailers aren't defending themselves more as the news media rip them to shreds over high gasoline prices. Can't Sunoco and others explain the link between high oil prices and the products that are made from them, she asked?

"We do try and we do respond," said Drosdick, but "sometimes it's difficult to find a forum where you can have a discussion."

"A lot of people don't realize that we buy all of our crude -- we don't produce it," he said, adding the company made gasoline at a loss in the first quarter. That led to Sunoco's first quarterly operating loss in almost six years.

Sunoco's reliance on sweet crude grades, especially volatile Nigerian supplies, really hurt and continues to hurt. While the price of sweet crude on the NYMEX has jumped to almost $120/b recently, the price of Nigerian crudes have also hit record-high premiums on supply concerns following strikes and rebel attacks on infrastructure.

Sunoco is also dealing with higher fuel costs, said Drosdick. He said they have effectively doubled for the refiner and that product prices have not kept pace.

Higher premiums for sweet crudes and higher transportation cost for crude have resulted in a 50% increase in the breakeven cost for refining since 2006, from about $6/barrel to $9/b, he said.