Are oil companies so disenchanted with the results of their venture into chemicals in the early 1960’s that they are unlikely ever to try again? The profit trends today are such that another venture may be in the offing:

(1) Refining and marketing operations in the industry are starved for higher earnings;

(2) The established chemical operations of the major oil companies have, with few exceptions, become more profitable than their corporate average;

(3) An analysis of the current thrust of companies’ capital appropriations and expenditures strongly suggests that their managements believe they will be better off diversifying into chemicals.

On the other hand, their experiences in the 1960’s should discourage the oil companies from expanding purely for the sake of expansion. They can be expected to avoid the fertilizer industry on the one hand and the problems of downstream integration into marketing consumer products on the other.

Instead, the oil companies’ investment in the chemicals this time around is likely to be concentrated in the basic petrochemicals, certain organic intermediates, and some or all of the commodity plastics. Arguing that, in these areas at least, the shortage environment of 1973-74 is unlikely ever to recur, the author examines the profit implications for some of the major chemical companies.