When oil prices soared in 1974, Mobil Corp. bought retailer Montgomery Ward -- reasoning that the best defense against roller-coaster oil prices was diversification out of the oil business. But Montgomery Ward was a money-losing bust.

After prices jumped again in 1979, Mobil tried a new tack: It purchased a large oil-producing company, Superior Oil. But oil prices plunged, straining Mobil's ability to pay back the billions it borrowed for the purchase.

This time around, the Fairfax-based oil giant is standing pat.

Despite disappointing third-quarter results from the huge increase in oil prices that followed the Aug. 2 Iraqi invasion of Kuwait, Mobil's leadership has decided not to tinker with the company's strategy, which assumes lower oil prices and is focused on basic oil and gas operations and some related businesses, such as chemicals and Hefty-brand plastic bags and housewares.

Mobil went back to basics a few years ago, unloading Montgomery Ward and another non-oil business, cardboard-box maker Container Corp. of America, and using some of the proceeds to help pay off the debt from its purchase of Superior Oil. Now the company -- whose $56.2 billion in annual revenue makes it by far the Washington area's largest corporation -- believes that concentrating on its core businesses is the best way to ride out, and ultimately take advantage of, the effects of the oil-price turmoil.

"You never say never, but there is nothing in our objectives now that would take us out of the core businesses we're in," Mobil Chairman and President Allen E. Murray said in an interview at the company's tree-surrounded headquarters in Fairfax, a glass-walled building with circular sections that resemble big black oil tanks.

"I think the energy business is the right business to be in in the long term, particularly the oil and gas business," Murray said. "We think we have good opportunities to spend money well and get good returns on these businesses. Until that day ends, or something happens which makes us change that, that's the way we're going."

The way Mobil sees it, the current oil-price spike is a short-lived phenomenon. Company executives believe that the price of oil shortly will return to a level somewhere near the preinvasion price of $20 a barrel from its highs of more than $40 and its recent level of more than $30.

Even if there is war, Murray said, it likely will be short and limited enough not to cause long-term damage to Middle East oil fields, and prices will return to lower levels after another, higher -- but very brief -- spike.

Such conditions would favor Mobil, which more than most other major oil companies is a refiner and marketer of gasoline and other petroleum products rather than a producer of crude oil -- although it also is making major investments to increase its crude oil production over the long term. When the price of crude oil, the main raw ingredient for its products, is dropping or stable at lower levels, Mobil's marketing and refining operation enjoys healthy profit margins that all but disappear when the price of oil is climbing.

Mobil's stubbornness in sticking to its preinvasion strategy is not surprising for a company long known inside and outside the oil business for its strong opinions and toughness in the face of adversity. It also reflects the management style of the affable but feisty Murray, who has guided Mobil through a tough streamlining program in the past half-decade that has chopped away $7 billion in assets and slashed employment to one-third the levels of a decade ago.

The strategy also reflects Mobil's political savvy. Savaged by politicians and public opinion during the two previous oil crises for using its huge profits to make acquisitions, Mobil has concluded that it is best this time to lie low and stick to its basic business.

That is not to say that Mobil has not been rattled by the tumult in the oil markets in the past few months, which hit just as the company felt it had gotten itself well-positioned for the next few years.

As crude oil soared past $40 a barrel in the weeks after the Iraqi invasion, Mobil was caught in a squeeze that belied popular assumptions that big oil companies were reaping big profits from the crisis.

Mobil both produces crude oil and turns it into products in its refineries. But the company is known in the oil industry for being "crude-poor" -- its wells are able to produce less than half the crude oil that its refineries require. So Mobil is forced to buy hundreds of thousands of barrels of oil a day on the open market.

At the same time, like many other oil companies, Mobil has not raised prices on gasoline and other products enough in recent months to fully recover its higher crude-oil costs. Responding to President Bush's calls for restraint and consumer resistance to higher prices -- and hoping to avoid the inevitable political backlash of higher gasoline prices -- Mobil increased its wholesale gasoline price during the third quarter by just 25 cents a gallon, half the rate of increase in the price of crude oil in the same period.

As a result, Mobil reported a profit of just $5 million on $12 billion in revenue from its huge refining and marketing operations in the third quarter -- and lost money on its sales of gasoline and other products in the United States. The company's overall profit dipped 29 percent, to $379 million (89 cents a share) in the quarter, as profits on the company's crude oil holdings and other operations offset some of the poor results in refining and marketing.

If Mobil is right in its outlook for the oil markets, its disappointing recent results should be about as short-lived as the oil-price spike, and industry analysts -- who give the company high marks in general -- agree.

"I think the third quarter is an anomaly," said George Friesen, a securities analyst who follows the company for Deutsche Bank Group in New York. "I think if crude prices stabilized, Mobil would do a lot better."

"I think they're in good shape," said Eugene Nowak, who follows oil companies for Dean Witter Reynolds Inc. in New York. "They're very well situated to continue to grow."

Last year, Mobil had a profit of $1.8 billion ($4.40 a share), and the company is expected to fall slightly short of that figure this year. But Nowak and other analysts are forecasting strong earnings growth for Mobil in 1991 and beyond.

Analysts said much of the credit for the company's ability to weather the oil-market turmoil caused by the Iraqi invasion of Kuwait can go to Murray, who joined Mobil as an accountant in 1962 and became chief executive in 1986.

Mobil was by no means in bad shape when Murray took over -- after all, it had turned a $1 billion profit the year before. But that profit came on $60.6 billion in revenue, a relatively paltry rate of return, and the company's profitability was sliding. Mobil was being dragged down by Montgomery Ward, which was hemorrhaging money, and a number of unprofitable oil and gas operations that had been hurt by tumbling oil prices in the early 1980s.

"We also had a high debt-to-equity ratio, which there's nothing wrong with per se, but we felt it might limit our ability to seize opportunities -- and, of course, the interest expenses. So we set about really to put a lot of things in a microscope," Murray said.

"We got rid of some businesses that weren't our core businesses: Montgomery Ward. Shut down a lot of refineries because they were inefficient, all around the world. {Sold} Container Corp. ... We were trying to streamline our company."

Part of Mobil's self-examination, which was not unlike the rigorous streamlining undertaken by many large industrial companies in the mid-1980s, was a reevaluation of the location of its headquarters.

The company that once was known as Standard Oil of New York was based in a grimy building on Manhattan's 42nd Street, across from Grand Central Station. Mobil officials concluded that they could save $40 million a year on taxes and other expenses just by leaving the Big Apple.

After considering several locations, Mobil settled on the Washington area, where the company's refining and marketing headquarters had been located for nearly a decade. The move to Fairfax was completed last summer and Mobil has more than 4,000 employees here, although Murray and some other senior executives still maintain homes in the New York area.

When Murray finished refocusing Mobil, it was a much smaller company, though it remains one of the nation's half-dozen largest industrial firms. From a peak of more than 200,000 workers during the oil boom in the late 1970s, Mobil's employment now is down to 67,900 -- mostly because of the subtraction of employee-intensive Montgomery Ward. Revenue fell from a peak of $68.6 billion in 1981 to $44.8 million in 1986, when oil prices bottomed out, before rebounding to last year's $56.2 billion.

Outwardly, today's version of Mobil is pretty much the model of a modern major multinational integrated oil company. It drills for and produces petroleum worldwide, with similarly extensive marketing and refining operations. And like most of its competitors. Mobil has a large chemicals and plastics operation, a logical extension of the oil business since petroleum is the main raw ingredient in chemicals and plastics and several chemicals are produced in bulk as byproducts of oil refinery operation.

But each of these business areas has a twist that makes Mobil less than typical in the industry. For one thing, it is somewhat inaccurate to describe Mobil as an "oil" company; it actually has slightly more natural gas than oil, and is a major marketer of gas, especially overseas.

Natural gas prices have been a lot more stable than oil prices lately, but they've also been lower, particularly in the United States, where a longstanding natural gas glut has kept prices down. But analysts expect gas supplies to tighten over the next few years, providing profitable opportunities for big gas producers like Mobil.

Another thing that separates Mobil from many of its competitors is that the company is much better at selling petroleum than it is at pumping it out of the ground. Although Mobil controls crude oil reserves totaling 3.2 billion barrels -- about an 11-year supply at current rates of production -- that's not nearly enough to supply the company's vast refining and marketing system, which consumes more than twice as much oil as the company produces. That puts Mobil in the market for crude oil and leaves it vulnerable at times of crude price increases.

Analysts said that Mobil's crude-poor position has forced it to become a top-notch marketing company, a leader in modernizing service stations and adopting aggressive and efficient selling techniques.

For instance, it helped popularize the "superpumper" stations of a few years ago that eliminated service bays and other amenities to maximize gasoline sales with a minimum of overhead.

In all, Mobil has about 23,000 gasoline stations worldwide, including 9,500 in the United States.

Mobil also is more of a consumer marketer in the chemicals and plastics business than most oil companies -- to its benefit.

Included in its Mobil Chemical division is the well-known Hefty brand of plastic bags, a business with much stronger markups than the commodity industrial chemical business in which Mobil also is a participant. Hefty has provided Mobil Chemical with a much-needed cushion as the rest of the chemicals business has suffered from falling prices recently.

Mobil is happy with this business mix, and it's putting its money where its strategy is.

The company's $4.6 billion in annual cash flow and strong borrowing ability give it a great deal of financial muscle in the capital-intensive oil business, and Mobil has budgeted $6 billion for petroleum exploration and development, facilities modernization and expansion and other capital expenditures over the next couple of years -- with most of that to be spent sooner rather than later.

A large part of that money will go toward the search for new oil supplies.

Though Mobil has an excellent record of replacing its existing reserves -- finding enough petroleum each year to make up for the amount it pumped out during the year, a key measure of success in the oil industry -- the company would like to improve its crude-poor position with a major discovery.

One possible candidate for a big new oil field is Canada's potentially rich Hibernia area off the coast of Newfoundland.

Mobil Canada is a leading member of a consortium of companies recently granted permission by the Canadian government to begin developing Hibernia, which is estimated to contain 500 million barrels of recoverable oil.

The company also is exploring and developing other prospects in locations ranging from Somalia to Britain's North Sea.

But there also have been setbacks, such as environmental constrictions on exploration of what Mobil considers to be a promising area off the North Carolina coast.

In addition to its exploration efforts, Mobil is spending money on improving and extending its existing businesses.

In recent months, for instance, it has purchased Esso Australia, a major gasoline marketing operation in that nation, and Tucker Housewares, the second-largest maker in the United States of plastic wastebaskets, laundry baskets and kitchenware, which will help to broaden Hefty's product line.

But Mobil won't be buying any more department stores or cardboard box companies, or anything else outside its core businesses, Murray said.

Confident that it can do better in the businesses it knows best, Mobil will spend its money on oil and chemicals -- and wait patiently for oil prices to come back down to the levels that Mobil foresaw when it drew up its current strategy.

"I'm going to make money when crude prices go down," Murray said. "We now appear to be in a tenuous but balanced situation {in oil supply}.

"And hopefully we'll bring prices down to some realistic level. ... With demand being down somewhat, I say barring either a disaster or a very cold winter, the industry is going to be fine."

1989 FIGURES

REVENUE..................$56.2 BILLION

PROFIT...................$1.8 BILLION

PER SHARE:...............$4.40

ASSETS...................$39 BILLION

EMPLOYEES................67,900

NET OIL RESERVES*........3.2 BILLION BARRELS

NET OIL PRODUCTION*......761,000 BARRELS/DAY

NET NATURAL GAS RESERVES....19.6 BILLION CU. FT.

NET NATURAL GAS PRODUCTION..4.5 MILLION CU. FT./DAY

U.S. SERVICE STATIONS....9,448

*INLUDES NATURAL GAS LIQUIDS

SOURCE;COMPANY REPORTS