Oil Company Executives Defend Profits
Senators Question Rise in Gasoline Prices
By H. JOSEF HEBERT, AP

WASHINGTON (Nov. 9) - The Senate hearing had yet to begin when a dispute erupted over whether the top executives of five major oil companies should testify under oath about their record profits.

Democrats wanted it that way, but Republicans balked, calling such a move a needless photo op that smacked of grandstanding. So no oath was taken.

In the three hours that followed, the executives, whose companies and parent corporations earned $32.8 billion during the last quarter, provided little beyond what the industry has been saying for weeks: Their profits are huge because the industry is huge; the companies are ready to invest billions of dollars to get more oil ; and if Congress tries to punish them by imposing a windfall profits tax, it will only lead to fewer such investments.

The oil executives found little sympathy from senators, who said their constituents are suffering from high energy prices while Big Oil makes big profits.

Sen. Barbara Boxer, D-Calif., cited multimillion-dollar bonuses - atop multimillion-dollar salaries and stock options - the executives are getting while "working people struggle" to pay for gasoline and face the specter of soaring home heating bills.

"People are concerned about fairness and justice at a time of sacrifice," Boxer told the executives. "Your sacrifice appears to be nothing."

None of the executives responded.

There is a "growing suspicion that oil companies are taking unfair advantage," said Pete Domenici, R-N.M. "The oil companies owe the American people an explanation."

Talking to reporters after the executives were dismissed, Domenici praised them for answering all the questions but added, "The question of gouging still remains" a mystery.

Lee Raymond, chairman of ExxonMobil Corp., the world's largest publicly traded oil company, acknowledged the high gasoline and home heating prices "have put a strain on Americans' household budgets," but he defended his company's profits. Petroleum earnings "go up and down" from year to year and are in line with other industries when compared with the industry's enormous revenues.

It would be a mistake, said Raymond, for the government to impose "punitive measures hastily crafted in response to short-term market fluctuations." They would probably result in less investment by the industry in refineries and other oil projects, he said.

ExxonMobil, the world's largest publicly traded oil company, earned nearly $10 billion in the third quarter. Raymond was joined at the witness table by the chief executives of Chevron Corp., ConocoPhillips, BPAmerica Inc., which is a division of BP PLC, and Shell Oil Co., a division of Royal Dutch Shell PLC.

But senators pressed the executives to explain why gasoline prices jumped so sharply in the aftermath of Hurricane Katrina, when prices at the pump in some areas soared by $1 a gallon or more overnight.

Sen. Bill Nelson, D-Fla., asked why the industry didn't freeze prices, as it did after the Sept. 11, 2001, terrorist attacks.

"We had to respond to the market," replied Chevron chairman David O'Reilly.

Raymond said that after Sept. 11 "the industry wasn't concerned about whether there was adequate supply," as it was after this year's Gulf storms. By keeping prices higher, adequate supplies were assured, he maintained.

Democrats said that during the storm some ExxonMobil gas station operators complained the company had raised the wholesale price of its gas by 24 cents a gallon in 24 hours.

Raymond said his company had issued guidelines "to minimize the increase in price" but added, "If we kept the price too low we would quickly run out (of fuel) at the service stations."

"It was a tough balancing act," said Raymond, who said ExxonMobil was not price gouging.

A number of Democrats have called for windfall profits taxes on the industry. Other senators, including Majority Leader Bill Frist, R-Tenn., have said it may be time to enact a federal law on price gouging.

Some Republican and Democratic lawmakers have suggested that the oil companies should funnel some of their earnings to supplement a federal program that helps low-income households pay heating bills.

That brought a cool reception from the executives.

"As an industry we feel it is not a good precedent to fund a government program," said James Mulva, chairman of ConocoPhillips.

The head of the Federal Trade Commission said a federal price-gouging law "likely will do more harm than good."

"While no consumers like price increases, in fact, price increases lower demand and help make the shortage shorter-lived than it otherwise would have been," FTC Chairman Deborah Platt Majoras told the hearing.

"That's an astounding theory of consumer protection," replied Sen. Ron Wyden, D-Ore.

Mulva of ConocoPhillips said, "We are ready open our records" to dispute allegations of price gouging. ConocoPhillips earned $3.8 billion in the third quarter, an 89 percent increase over a year earlier. But Mulva said that represents only a 7.7 percent profit margin.

"We do not consider that a windfall," he said Mulva.

Chevron's O'Reilly attributed the high energy prices to tight supplies even before the hurricanes struck. He said his company is "investing aggressively in the development of new energy supplies."

Shell earned $9 billion in the third quarter, said John Hofmeister, president of Shell Oil Co., but he said the company's investment in U.S. operations over the last five years was equal to its income from U.S. sales.

"We respectfully request that Congress do no harm by distorting markets or seeking punitive taxes on an industry working hard to respond to high prices and supply shortfalls," said Hofmeister.

Originally posted by Patrick:

The Senate hearing had yet to begin when a dispute erupted over whether the top executives of five major oil companies should testify under oath about their record profits.

Democrats wanted it that way, but Republicans balked, calling such a move a needless photo op that smacked of grandstanding. So no oath was taken.

Originally posted by SC:
[quote]Originally posted by Patrick:
[b]
The Senate hearing had yet to begin when a dispute erupted over whether the top executives of five major oil companies should testify under oath about their record profits.

Democrats wanted it that way, but Republicans balked, calling such a move a needless photo op that smacked of grandstanding. So no oath was taken.

Originally posted by Patrick:
[Goes to show that neither conservatives or liberals in this country want to solve a major problem.

"There is a growing suspicion that oil companies are taking unfair advantage," said Pete Domenici, R-N.M. "The oil companies owe the American people an explanation."

Sen. Barbara Boxer, D-Calif., cited multimillion-dollar bonuses - atop multimillion-dollar salaries and stock options - the executives are getting while "working people struggle" to pay for gasoline and face the specter of soaring home heating bills.

Majority Leader Bill Frist, R-Tenn., has said it may be time to enact a federal law on price gouging.

Originally posted by Patrick:
They are the same religious nuts that are heading our country. Let's take them up on their faith and see how close to 'god' they are. Nut cases.

Come on, DC, I can say so much right now about how I feel about rich Republicans who are conservative and too religious.

Originally posted by Double-J:
[quote]Originally posted by Patrick:
[b] They are the same religious nuts that are heading our country. Let's take them up on their faith and see how close to 'god' they are. Nut cases.

As Don Cardi has pointed out, you've neglected the Republicans who were just as hard on the oil executives as the Democrats were (despite your comment that "at least the Democrats are trying to do something"). And SC furthered the truth, when he pointed out that it wouldn't matter anyways whether they swore on the Bible or not.

Actually, I'm surprised you aren't more incensed over the fact that there was a Bible to swear to - I thought that would certainly irk your anti-religious stance. Yet, in this case, you think they should've had to utilize this outright religious emblem in the (gasp) public arena?

Come on, Pat, I can say so much right now about how I feel about rich Democrats who are liberal and pretend to be relgious and promote moral values when in reality they are just as corrupt as their counterparts in the conservative section.

I didn't say anything about all Republican Conservatives being religious. I said the ones in Congress, ie the ones 'heading our country.'

I'm not neglecting them at all, but it's simple: the Republicans weren't as hard on the oil execs as the Democrats because the Republicans didn't want them swearing under oath.

Please show me where I have ever said I was anti-religious.

Nothing's ever stopped you from saying something unintelligent before.

Well, let's see.

The Republicans have the majority in Congress, so by default they are "heading our country."

Originally posted by Double-J:

And then you say they are "the same religious nuts heading our country."

How so? Republicans like Frist said it might be time for legislation. Just because they didn't make them go under oath? As SC has pointed out, these people are already corrupt, I sincerely doubt making them swear on the Bible would make them change their minds.

Well, in about every other political thread, you call people who believe in God "religious nuts," for a start.

An underhanded insult? Interesting. I'm assuming you aren't going to try and keep the debates clean, as I pledged to do?

Originally posted by Double-J:
Well, let's see.The Republicans have the majority in Congress, so by default they are "heading our country."

And then you say they are "the same religious nuts heading our country."

Of course, I'm not exactly sure how you're going to prove that those heading our country are "religious nuts," but you can try.

Wow! Listen closely next time Bush is giving a speech (he's the head of this country). However, I guess you won't have to listen too closely. The writing's on the wall.


How so? Republicans like Frist said it might be time for legislation. Just because they didn't make them go under oath? As SC has pointed out, these people are already corrupt, I sincerely doubt making them swear on the Bible would make them change their minds.

Good point! This at least leads to perjury, however. If we tried hard enough, we could make it a case.

I'm assuming you aren't going to try and keep the debates clean, as I pledged to do?

Originally posted by Patrick:
Republicans weren't as hard on the oil execs as the Democrats because the Republicans didn't want them swearing under oath.

I sincerely doubt making them swear on the Bible would make them change their minds.

Originally posted by Patrick:
Tell me what harm it would do.

Originally posted by Don Cardi:
Plaw, I happen to agree with you here about the free enterprise in this country and the right for any compnay to legally make profits without government intervention.

Originally posted by Don Cardi:

Let me give you an example. On Sept 1st Gas station Z takes delivery of 10,000 gallons of gasoline at a price of $1.25 per gallon. The open market price. After figuring in state taxes, delivery costs and general operating costs, the retail price for them to sell the gasoline at is $1.85 per gallon. ( The average mark up for gasoline is usually .60 over the open market wholesale price). Then on Sept 3rd, a hurricane rips apart the refineries and there is specualtion that there will be a gas shortage and the open market wholesale price of gas shoots up to $2.00 per gallon.

It's only 2 days since Gas Station Z has taken delivery of 10,000 gallons of gasoline. Enough gas under normal supply and demand to last them 3 weeks to a month. Now of course there is going to be a public run on the stations because people begin to panic, so that 10,000 gallon delivery may only last the gas station 2 weeks instead of a month.

But on Sept. 4th, only two days after taking delivery at a much lower price, gas station Z decideds to jack up their retail prices to $2.35 per gallon. This is price gouging. That station bought their wholesale gas before there was a spike in the wholesale price due to a hurricane. And that station should not be allowed to take advantage of a disaster and gouge the public because that station did not have to pay a higher price for the gas that they bought to sell only two days before.


Don Cardi