Senators to grill oil executives (AP) Updated: 2005-11-09 22:30
Huge oil company profits at a time when motorists paid $3-plus for gasoline
have sent shivers through a Congress worried about the political fallout.
Now senators are venting some anger — and hoping to get some answers — as the
top executives of five of the biggest and most profitable oil companies testify
at a Senate hearing.
The executives hoped Wednesday to dampen any further momentum for calls for
taxing windfall oil company profits, something still viewed as a longshot but
also no longer out of the question. Such a tax could inhibit investment in
refineries or oil exploration and production, the industry contends.
The oil industry's record third-quarter profits — at a time when motorists
were reeling from unprecedentedly high gasoline costs and warned of huge heating
bills this winter — has caught the attention of both Republicans and Democrats
in Congress. Some analysts predict the 29 largest oil companies will earn $96
billion this year.
"Consumers need relief from high energy prices,"
Sen. Byron Dorgan, D-N.D., said Tuesday, reiterating his call for a windfall
profits tax on oil companies. "Talk is cheap. The price of energy is not.
Congress needs to act."
By most accounts, the hearing Wednesday will have much rhetoric and likely
result in little action.
Lawmakers, especially on the Republican side, "need some cover in the face of
record-breaking profits," says Christine Tezak, an energy analyst for Stanford
Washington Research Group. "Expect a lot of criticism ... but there is far more
rhetoric than votes in support of windfall profits taxes."
The oil executives are expected to defend their profits and emphasize that
the profit numbers are huge because the industry is huge.
Together the five companies — Exxon Mobil Corp., Chevron, ConocoPhillips,
BPAmerica and Shell Oil USA — reported more than $25 billion in profits in the
July-September quarter as the price of crude oil hit $70 a barrel and gasoline
surged to record levels after the disruptions of Hurricanes Katrina and Rita.
"It's profits that make the companies run and make the economy run,"
ExxonMobil chairman Lee Raymond said Tuesday on CNBC, showing no sign of being
defensive about his company's nearly $10 billion in earnings, on revenue of $100
billion, during the third quarter.
He called the industry cyclical by nature. "We have to have the peaks because
we know we're going to have the valleys," he said, adding that ExxonMobil plans
to invest $18 billion this year. As for a windfall tax, Raymond said it will
mean "less earnings" and "our ability and willingness to invest is going to
diminish."
The industry argues that the run-up of gasoline prices, which began earlier
in the year, stems from high global crude oil costs and growing demand for
gasoline this past summer, followed by a disruption of gasoline supplies when
the hurricanes shut down more than a dozen refineries on the Gulf Coast.
Prices since have retreated from more than $3 a gallon to an average
nationwide last week of $2.37, according to the Energy Department.
While the loudest calls for action against oil companies has come from
Democrats, some Republicans have expressed similar frustrations.
"They are unhappy with the behavior of the oil companies," said GOP pollster
David Winston, who advises GOP congressional leaders. "These are free market
guys. They believe the market works. But in this case they are concerned that
the consumer was clearly taken advantage of ... and they're pretty angry about
it."
Senate Majority Leader Bill Frist, R-Tenn., who called the hearing to examine
oil profits, said it may be time for a federal law against energy price gouging.
And House Speaker Dennis Hastert, R-Ill., recently urged oil companies to invest
more of their money into building more refineries, warning that if they don't
Congress may take action.
Hastert said he plans to meet privately with a number of oil company
executives this week to discuss, "eyeball-to-eyeball," the recent profit surge.
An aide to Hastert said the speaker does not favor a windfall profits tax, but
that momentum for it is growing.
Last week, Sen. Charles Grassley, R-Iowa, urged
the industry to donate some of its profits to help low-income families meet
energy costs. Advocates for the poor estimate $5.1 billion will be needed to
help low-income households pay for heating this winter. The government provided
about $2 billion last year.
Grassley said he still opposes a windfall profits tax
on the oil companies. Another Republican, Sen. Judd Gregg, of New Hampshire,
however, has joined a number of Democrats in calling for such a
tax.
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