At hearing, Big Oil says its profits aren't extreme
WASHINGTON — Top executives of the five biggest American oil companies say they know consumers are feeling the pain of high gasoline prices. But at a congressional hearing, they deflected any blame, and they argued that their profits — $123 billion last year — were in line with other industries.
Rep. Edward Markey, D-Mass., noting the hearing was being held on April Fool's Day, said, "The biggest joke of all is being played on American families by Big Oil."
Lawmakers were looking for answers to the soaring fuel costs a day after the Energy Department said the national average price of gasoline reached a record $3.29 a gallon and global oil prices remained above $100 a barrel although supplies of both gasoline and oil seemed to be adequate.
"I heard what you are hearing," John Hofmeister, president of Shell Oil (RDSA), told Markey, adding in prepared testimony that he knows that "Americans are worried about the rising price of energy.... These cost increases are hitting consumers hard, particularly the poor and those on fixed incomes."
But neither Hofmeister nor executives from ExxonMobil (XOM), BP America (BP), Chevron (CVX) and ConocoPhillips (COP) said their companies should be blamed and they rejected the notion that their profits are extreme.
"Our earnings, though high in absolute terms, need to be viewed in the context of the scale and cyclical, long-term nature of our industry as well as the huge investment requirements," said J.S. Simon, ExxonMobil's senior vice president. Last year the oil and gas industry earned 8.3 cents per dollar of sales, only a little higher than the Dow Jones industrial average for major industries, he argued in prepared testimony.
Executives from the largest U.S oil companies have been frequent targets of lawmakers, frustrated at not being able to do much to counter soaring oil and gasoline costs.
In November, 2005, Hofmeister and the top executives of the same companies represented Tuesday, sat in a Senate hearing room tried to explained high prices and their huge profits.
The prices are of concern, Hofmeister said at the time, adding a note of optimism: "Our industry is extremely cyclical and what goes up almost always comes down," he told the skeptical senators on a day when oil cost $60 a barrel.
About six months later, when the cost of the same barrel reached $75, the executives were grilled again on Capitol Hill on their spending and investment priorities.
Recently oil prices reached a peak of $111 a barrel. While declining a bit in recent days, the price remains above $100 and there's talk of $4 a gallon gasoline in the coming months.
Markey challenged the executives to pledge to invest 10% of their profits to develop renewable energy and give up $18 billion in tax breaks over 10 years so money could be funneled to support other energy and conservation.
The executives said the companies already are spending billions of dollars — more than $3.5 billion over the last five years — on renewable fuels such as wind energy and biodiesel, but rejected any tax increases.
"Imposing punitive taxes on American energy companies, which already pay record taxes, will discourage the sustained investment needed to continue safeguarding U.S. energy security," Simon insisted.
"These companies are defending billions of federal subsidies ... while reaping over a hundred billion dollars in profits in just the last year alone," complained Markey, chairman of the Select Committee on Energy Independence and Global Warming.
The House last year and again on Feb. 27 approved legislation that would have ended the tax breaks for the oil giants, while using the revenue to support wind, solar and other renewable fuels and incentives for energy conservation. The measure has not passed the Senate.
The oil industry has argued on Capitol Hill and at the White House that the tax breaks are needed to assure continued investment in exploration, production and refinery expansions. President Bush has promised to veto any such bill, saying the oil companies should not be singled out.
The threat of nationwide $4-a-gallon gasoline, perhaps this summer, and $100-a-barrel oil is producing strong political reverberations, even as lawmakers acknowledged there is little that Congress can do to bring prices down.
On Monday, Rep. Neil Abercrombie, D-Hawaii, said the president should release oil from the government's emergency reserve to put more supplies on the market, saying, "We are quite clearly in the midst of an energy emergency." He noted the bankruptcy of Aloha Airlines, blamed in part on high jet-fuel costs.
The White House has repeatedly rejected use of the oil in the federal Strategic Petroleum Reserve to influence prices.
Edited to add the link.
Originally Posted by Parkbandit
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and people wonder why Congress has a what.. 12% approval rating.
