View Full Version : Oil executives offer defense of high profits

11-09-2005, 02:00 PM
Oil Executives Defend Profits Before a Critical Congress


Published: November 9, 2005

Executives from five of the world's biggest oil companies defended their companies' high profits at a Senate hearing in Washington today as lawmakers pressed them to account for soaring gasoline, diesel and natural gas prices in the months after Hurricanes Katrina and Rita struck the Gulf Coast.

Later in the afternoon, senators heard from three state attorneys general about the relative effectiveness of state laws and the need for federal "price gouging" laws, while the head of the Federal Trade Commission told lawmakers that competition was more effective in controlling prices.

The oil company executives did acknowledge that high prices had hurt consumers, but they emphasized that by some measures their profits were not out of line and that prices were being driven by larger forces often out of their control.

"Today's higher prices are a function of longer-term supply and demand trends and lost energy production during the recent hurricanes," James Mulva, chairman and chief executive of ConocoPhillips, told a joint meeting of the Senate Energy and Natural Resources Committee and the Commerce Committee.

But several senators, mostly Democrats along with some Republicans, appeared unsatisfied by those responses and demanded to know what the energy industry was doing to increase supplies and whether they would help promote conservation measures.

"Most Americans and most of the polls show that our people have a growing suspicion that the oil companies are taking unfair advantage of the current market conditions to line their coffers with excess profits," Pete Domenici, Republican from New Mexico, said during a televised hearing.

Senator Barbara Boxer, Democrat of California, said: "Working people struggle with high gas prices, and your sacrifice, gentlemen, appears to be nothing." She noted that the executives were making millions of dollars in salaries, bonuses and stock awards.

Some senators have called for a windfall profits tax on oil company profits that would help families pay high heating bills and other energy costs.

Oil, gasoline and natural gas prices soared in the weeks after Hurricane Katrina struck New Orleans and the Gulf Coast and shut down the vast majority of offshore production and a significant amount of domestic oil refining.

Gasoline prices spiked past $3 a gallon in many parts of the United States, though they have retreated to pre-Katrina levels since. As of Monday, a gallon of regular, unleaded gasoline cost $2.38 nationally, according to the Energy Information Administration. Natural gas prices, however, remain about 20 percent higher than before Katrina - $11.83 per thousand cubic feet.

Senator Conrad Burns, Republican of Montana, said high diesel prices, which rose higher after Hurricane Rita than gasoline prices and have come down far more slowly, were squeezing farmers and making American agricultural products too expensive for world markets.

"Let the American people understand, agriculture is going to get shut down," he said. "We're not going to turn on one tractor to produce food and fiber for this country under these kind of conditions. We have to do something different."

The executives, who represented Exxon Mobil, Chevron, ConocoPhillips, Royal Dutch Shell and BP, noted that they have been investing most of their profits into new production and refining. Lee Raymond, chairman and chief executive of Exxon, which recently reported a $9.92 billion profit, also noted that the industry's profits measured as percent of revenue were no greater than other industries.

"We are in line with the average of all U.S. industry," he said. "Our numbers are huge because the scale of our industry is huge. How are these earnings used? We invest to run our global operations, to develop future supply, to advance energy-producing and saving technologies, and to meet our obligations to millions of our shareholders."

Mr. Raymond and the other chief executives asserted that in the past decade their capital investments have matched their profits.

Asked what they were doing to increase domestic oil refining capacity and bring on additional sources of energy, the executives said investments in their industry can take decades to come to fruition.

Mr. Raymond said that even if governments streamlined the approval process for constructing new refineries, a move the energy industry has sought, it would take years to build new plants. Instead of building new plants, Exxon has chosen to expand existing plants, he said.

"It is much more efficient because the basic infrastructure is already in place," he said. "Over the last 10 years, Exxon Mobil alone has built the equivalent of three average-sized refineries through expansions and efficiency gains at existing U.S. refineries."

Some of the executives said Congress could help bring more energy supplies on the market by allowing the industry to develop oil and natural gas rigs and platforms in places like the Florida coastal waters, which have been put off limits to exploration.

Later in the day, several senators and three state attorneys general sparred with the chairwoman of the Federal Trade Commission, Deborah Platt Majoras, about whether Congress should consider a federal law criminalizing "price gouging," which some lawmakers defined as an unconscionable increase in prices.

The prosecutors and lawmakers argued that policymakers needed better tools to deal with gasoline stations and oil companies that take advantage of an emergency to increase prices and raise their profits.

"I do believe that we need a federal statute that has a criminal penalty and we have to look at what the statute will be in terms of the criminal penalty," said Senator Ted Stevens, the Republican from Alaska who is chairman of the Commerce Committee.

Ms. Majoras countered that the government would set off energy shortages by trying to limit price increases during emergencies. If there are specific instances of egregious price spikes, she suggested state and local authorities would be better positioned to deal with them than the federal government.

"Higher prices - as tough as they are to swallow, and they are - help curtail panic buying and the topping off," she said.

But New Jersey's attorney general, Peter C. Harvey, asserted that consumers were not harmed by the state's recent prosecution of gasoline stations and oil companies that raised prices more than that state's once-a-day limit. "There were no lines," he said. "In fact, what we saw were prices began to decrease."

http://img315.imageshack.us/img315/9084/gasprices9am.gif web page (http://www.nytimes.com/2005/11/09/business/09cnd-energy.html?hp&ex=1131598800&en=0355d9b2e54af6fb&e i=5094&partner=homepage)

11-09-2005, 03:19 PM
Just another example of Bush and his buddies in the Oil industry getting rich on the backs of the working people of the world.

11-09-2005, 08:30 PM
FTC subpoenas Big Oil firms in U.S. gasoline probe

WASHINGTON (Reuters) - The Federal Trade Commission has sent subpoenas to Big Oil companies in its investigation of gasoline price manipulation and oil refining capacity constraints, and hopes to complete the probe next spring, the agency's head told a U.S. Senate hearing on Wednesday.

The agency sent out "dozens of subpoenas" to companies, including oil giants Exxon Mobil Corp., Chevron Corp. , ConocoPhillips, and the U.S. units of BP Plc. (BP.L) and Royal Dutch Shell Plc., FTC Chairwoman Deborah Majoras said.

She spoke following a hearing on energy profits held by the Senate's energy and commerce committees. "It is a major investigation."

Executives from the five companies mentioned testified earlier in the day on their record profits and high energy prices.

Majoras said subpoenas were sent to companies that operated pipelines, refineries and terminals.

The FTC is asking the companies only for information at this point, but agency staff said the companies' officials could also be asked to testify in the investigation.

"If there is anticompetitive behavior going on between and among these gasoline companies, we'll find that and we will prosecute," Majoras said.

The commission plans to finish its investigation and report its findings to Congress next spring, she said.

The FTC probe was ordered by Congress last summer as part of a broad energy bill with $14.5 billion in industry incentives. Lawmakers included the provision because of a steady climb in crude oil and gasoline prices throughout 2005.

Less than a month after the bill was signed into law, Hurricane Katrina thundered through the Gulf of Mexico and Louisiana, flooding eight major refineries and halting most offshore oil production. The national average retail price of gasoline surged to a record $3.07 a gallon soon afterward.

Lawmakers on the two Senate panels expressed concern about the sharp increase in gasoline prices.

"The FTC staff is looking at pricing decisions and other conduct in the wake of Katrina to understand what has occurred and to identify any illegal conduct," Majoras said.

Majoras also warned that the United States is "vulnerable to these price spikes as long as we accept the tight refining capacity and the dependence that we have on foreign oil," she said. "We are going to be in for a tough road."

Consumers are understandably upset when they face sharp price increases at the gasoline pump, Majoras said.

But congressional proposals for a federal law prohibiting price profiteering are not necessarily the answer, she added.

"Price gouging laws that have the effect of controlling prices likely do more harm than good," Majoras said. "While no consumer likes price increases, in fact, price increases lower demand and help make the shortage shorter-lived than it otherwise would have been."

Twenty-eight states and the District of Columbia have protections against price gouging. But some state attorneys general, consumer groups and lawmakers believe it is time to have a federal law to also fight price gouging.

"When there is a natural disaster or emergency situation in one area of the country that affects the supply and pricing of an essential, nationally distributed product, as (gasoline was) with Katrina, Congress should provide a mechanism that reduces the volatility of prices across state lines," New Jersey Attorney General Peter Harvey told the panel.

"For this, a federal law could protect all American consumers against price gouging during national or regional disasters or abnormal market disruptions" said Arizona Attorney General Terry Goddard.

Bills to prohibit oil price profiteering after natural disasters or national emergencies have been offered by several Democrats. Senate Majority Leader Bill Frist, a Republican, said last month he would support such legislation "if the facts warrant it."

Earlier Wednesday at the Senate hearing, top executives of Exxon Mobil and the four other major oil companies defended a jump in third-quarter profits, which reflected the recent record-high prices of gasoline, crude oil and natural gas.

web page (http://cnn.netscape.cnn.com/news/story.jsp?id=2005110917140002613974&dt=20051109171 400&w=RTR&coview=)

11-10-2005, 05:20 AM
But several senators, mostly Democrats along with some Republicans, appeared unsatisfied by those responses and demanded to know what the energy industry was doing to increase supplies and whether they would help promote conservation measures.
<hr /></blockquote> Thought this paragraph was a bit funny, they want the oil companies to provide more supplies of oil, however they also want to the oil company to preach conservation. Just a tad contradictory. /ccboard/images/graemlins/smile.gif

"Most Americans and most of the polls show that our people have a growing suspicion that the oil companies are taking unfair advantage of the current market conditions to line their coffers with excess profits," Pete Domenici, Republican from New Mexico, said during a televised hearing. <hr /></blockquote> The only people who have a growing suspicion that the oil companies are taking advantage are the ones who are looking for a free handout. This ridiculous day in Congress has nothing to do about the fact that some companies had record profits, the real truth about it is that the companies in question have something to do with OIL and so does our President.