Congress Grills Big Oil Execs

Wed, Apr 2, 2008 at 1:07 pm

    Congress Grills Big Oil Execs

    Congress Grills Top Oil Execs On Profits

    Company leaders say they’re not to blame

    By H. Josef Hebert (AP), Ventura County Star (California)

    April 02, 2008

    WASHINGTON DC — Don’t blame us, oil industry chiefs told a skeptical Congress.

    Top executives of the country’s five biggest oil companies said
    Tuesday they know record fuel prices are hurting people, but they
    argued it’s not their fault and their huge profits are in line with
    other industries.

    Appearing before a House committee, the executives were pressed to
    explain why they should continue to get billions of dollars in tax
    breaks when they made $123 billion last year and motorists are paying
    record gasoline prices at the pump.

    "On April Fools’ Day, the biggest joke of all is being played on
    American families by Big Oil," said Rep. Edward Markey, D-Mass., aiming
    his remarks at the five executives sitting shoulder to shoulder in a
    congressional hearing room.

    "Our earnings, although 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, senior
    vice president of Exxon Mobil Corp., which made a record $40 billion
    last year.

    "We depend on high earnings during the up cycle to sustain investment over the long term, including the down cycles," he said.

    The up cycle has been going on too long, suggested Rep. Emanuel Cleaver, D-Mo. "The anger level is rising significantly."

    Talk of $4 a gallon

    Alluding to the fact that Congress often doesn’t rate very high in
    opinion polls, Cleaver told the executives: "Your approval rating is
    lower than ours, and that means you’re down low."

    Several lawmakers noted the rising price of gasoline at the pump,
    now averaging $3.29 a gallon amid talk of $4 a gallon this summer.

    Ventura County’s average price of regular unleaded gas was at a
    record $3.62 a gallon Tuesday, with diesel selling at $4.19 a gallon.

    "I heard what you are hearing. Americans are very worried about the
    rising price of energy," said John Hofmeister, president of Shell Oil
    Co., echoing remarks by the four other executives, including
    representatives of BP America Inc., Chevron Corp. and ConocoPhillips.

    While Democrats hammered the executives for their profits and
    demanded they do more to develop alternative energy sources such as
    wind, solar and biofuels, Republican lawmakers called for opening more
    areas for drilling to boost domestic production of oil and gas.

    What would bring lower prices? asked Rep. James Sensenbrenner of Wisconsin, the committee’s ranking Republican.

    "We need access to all kinds of energy supply," replied Robert
    Malone, chairman of BP America, adding that 85 percent of the country’s
    coastal waters are off limits to drilling.

    "Every one of the oil executives seemed to think that what oil
    companies really need is the right to drill for more oil off the coast
    of California," said Judy Dugan of the Santa Monica-based nonprofit
    Consumer Watchdog. "They think Californians have forgotten the
    devastating spill that their old rigs caused in 1969, and it’s a shame
    the committee members didn’t remind them. Even more to the point, the
    rigs off of Ventura and Santa Barbara are increasingly just
    nonproducing, rusting eyesores that mar the coastline and no longer
    pump oil. Big Oil wants to build scores of new offshore rigs and call
    it an energy solution, without even taking responsibility for the ocean
    trash they bequeathed us."

    Markey wanted to know why the companies aren’t investing more in
    energy projects other than oil and gas — or giving up some tax breaks
    so the money could be directed to promote renewable fuels and
    conservation and take pressure off oil and gas supplies.

    "Why is Exxon Mobil resisting the renewable revolution?" asked
    Markey, noting that the four other companies together have invested
    $3.5 billion in solar, wind and biodiesel projects.

    Exxon is spending $100 million on research into climate change at
    Stanford University, replied Simon, but current alternative energy
    technologies "just do not have an appreciable impact" in addressing
    "the challenge we’re trying to meet."

    The appearance Tuesday before the Select Committee on Energy
    Independence and Global Warming was not the first time that oil
    executives had faced the harsh words of lawmakers frustrated over their
    inability to do anything about soaring oil and gasoline costs.

    In November 2005, executives of the same companies sought to explain
    high energy costs at a Senate hearing at which Hofmeister emphasized
    the cyclical nature of his industry. "What goes up almost always comes
    down," he told the senators on a day when oil cost $60 a barrel.

    About six months later, the executives were grilled again on Capitol
    Hill when a barrel of oil cost $75. As the three-hour House hearing
    came to a close Tuesday, the price of oil settled at just over $100 a
    barrel on the New York exchange.

    Oil executives challenged

    "We face a new reality, volatility, high prices, greater competition
    for resources," said Peter Robertson, vice president of Chevron Corp.,
    adding that he understands that "Americans see the pain" of
    $100-a-barrel oil.

    Markey challenged the executives to pledge to invest 10 percent 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.

    They responded that their companies already are spending on
    alternative energy projects and argued that new taxes would dampen
    investment and could lead to even higher prices.

    "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," said Simon.

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