NEW YORK (TheStreet) -- The refining business of the oil behemoth Chevron (CVX) - Get Chevron Corporation Report has turned out to be a promising hedge in a period of deteriorating oil prices, which was evident in its latest quarterly results.

But that may not continue if oil prices go back up or if the lower prices remain for a prolonged period of time.

Chevron's third-quarter results showed total production slightly dropped from 2.58 million barrels a day last year to 2.56 million barrels a day. With declining crude prices, Chevron's earnings from oil and gas production fell 9% year over year to $4.65 billion.

However, the company's profits climbed 13% thanks to a four-fold increase in profits from downstream, or refining and marketing operations that benefited from lower oil prices that reduced the unit's input costs. Shares are down nearly 9% for the year to date.

In an email to TheStreet, Justin Higgs, Chevron's spokesperson, said that a well managed downstream business "continues to produce significant value for us as an integrated energy company."

Chevron's competitor Exxon Mobil (XOM) - Get Exxon Mobil Corporation Reportalso reported similar results as higher income from downstream business offset the decline coming from oil and gas exploration and production.

Raymond James analyst Pavel Molchanov explained an email to TheStreet that although refining is just as cyclical as oil prices, "it often serves as a natural hedge when oil prices are down."

Chevron, as well as Exxon Mobil, retained their refining and marketing business as some of the other oil producers, such as ConocoPhillips (COP) - Get ConocoPhillips Report and Marathon Oil (MRO) - Get Marathon Oil Corporation (MRO) Report , spun off these units into new companies to focus solely on exploration and production.

Unlike Chevron, ConocoPhillips and Marathon Oil reported 12% and 13% drops in profits, respectively, excluding the impact of one-time items such as asset sales, in their last quarterly results due, in part, to lower crude prices. For Chevron, however, the downstream segment will continue to "support profitability in times of lower oil prices" said Molchanov, who has a strong buy rating on the stock with a price target of $140.

Further, Chevron will benefit from fastest production growth in the near future compared to its peers, Molchanov said. The company has three major international LNG projects that are expected to come online through 2016 and three large deepwater ventures at the Gulf of Mexico that will begin pumping oil through 2015.

TheStreet Recommends

However, there is a flip side.

Molchanov said the refining business can also drag the performance of the company whenever oil prices rebound. In this scenario, Chevron and other major integrated energy companies such as Exxon Mobil will "benefit to a lesser extent than pure-play oil producers."

Furthermore, while higher profits from Chevron's downstream segment have led to an increase in total profits, this cannot go on forever. If the current weakness in oil prices continues, Chevron's earnings will likely drop by "over 20%" next year, Molchanov predicted.

This is because Chevron is essentially an oil and liquids producer. These liquids constitute a majority of Chevron's output and have been responsible for more than 90% of its earnings this year. In the first nine months of 2014, Chevron's earnings from oil and gas exploration and production has been more than five times greater than its earnings from refining and marketing business, despite the big jump in profits from the latter in the previous quarter.

It is worth mentioning here that besides Chevron, the production of a vast majority of multinational oil and gas producers is also linked to liquids, Molchanov wrote, which leaves them exposed to oil price risk. Even some gas production is also "oil-linked," particularly when it comes to liquefied natural gas whose contracts are based on the benchmark crude prices.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

TheStreet Ratings team rates CHEVRON CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHEVRON CORP (CVX) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

You can view the full analysis from the report here: CVX Ratings Report