Internal memo on Tidewater Oil’s Eastern Division losses and proposed terminal consolidation

Tidewater Oil Company, which would merge into its parent Getty Oil Company a few years later, had red ink problems in its Eastern Division. My job was to see why. Eastern Division was run by “Jim” Jiminez, an upbeat guy I liked. | don’t think he took the red-ink problems home with him as Cap Balfour had. He reported to my half-brother George at corporate headquarters in Los Angeles, and George reported to my father in London. George had earned his job as president by outstanding performance at every level on the way up, which is more than you could say for me in the Neutral Zone. But George was touchy. He had a chip on his shoulder. | think my father liked to ride him, and he sometimes felt unappreciated. You have to shrug that off. George was doing fine. The problem in Eastern Division was not in him, and it was not in Jim Jiminez. Then what? I looked at the books. The red ink had nothing to do with management. Eastern Division did refining and marketing. Its new refinery in Delaware had been optimized to process heavy Wafra crude oil, which then was over a dollar cheaper per barrel on the market than the lighter and easier-to-refine crude we produced in Texas and the Central Basin. Tidewater’s Western Division refinery at Martinez, by contrast, had all the cheap oil it needed in our own San Joaquin field. The Martinez refinery was old, and more expensive to operate. But the net advantage still went to Western Division by about a dollar per barrel. Meanwhile gasoline sold for about a dollar less per barrel, although only two or three cents less per gallon, in the refinery-loaded east than in California. Management can’t do much about import quotas and market conditions. I reported to my father that Eastern Division was at least as well run as Western Division, where the ink was black thanks to cheaper crude and pricier gasoline. Then could we cut costs or boost receipts in other ways? I proposed that we close our old and inefficient Boston Harbor terminal, where barges unloaded gasoline into our tank farms to be trucked to stations, and supply Boston from our new terminal at Providence two hours’ drive away. If that worked, other distribution consolidations seemed possible. | later proposed much the same thing for our Chapter 1: Recollections 1/06/16 7 HOUSE_OVERSIGHT_010923