Some of the world’s top oil executives were on Wednesday forced to defend themselves in Washington against charges of profiteering. At a politically charged Senate hearing, executives from Exxon Mobil, Shell, BP, Chevron and ConocoPhillips were grilled about the eye-popping size of recent earnings as consumers struggled with rising petrol prices.
The chairperson of the Senate energy committee, Pete Domenici, told them there is a ”growing suspicion that oil companies are taking unfair advantage” of crude prices that recently touched $70 a barrel.
”The oil companies owe the country an explanation,” he said.
The oil industry has been attracting increasing criticism. Exxon Mobil earned almost $10-billion during the third quarter, leading some Democrats to call for a windfall tax. The hearing was remarkable chiefly because it was convened by the Senate’s Republican leadership. The party is more commonly regarded as an ally of the oil industry, particularly under the current administration.
The hearing demonstrates how potent rising petrol and home heating costs have become as a political issue. Earlier this year, Republicans had pushed through a further $14,5-billion in tax breaks for the industry.
Lee Raymond, chairperson of Exxon Mobil, admitted that rising gasoline prices ”have put a strain on Americans’ household budgets” but otherwise was unbowed. The industry’s earnings per dollar of revenue, he said, are in line with other industries. Profits, he added, ”go up and down”.
The industry’s record earnings caused particular alarm following hurricanes Katrina and Rita, which led to supply shortages and queues at petrol stations.
Raymond warned against a windfall tax and said it would only prove a disincentive to further investments in domestic production.
”History teaches us that punitive measures, hastily crafted in reaction to short-term market fluctuations, will likely have unintended negative consequences,” he said.
President Jimmy Carter’s windfall tax in 1980 created shortages and record prices, he added.
”Markets work, if we let them. Governments can best help by creating a stable and predictable investment environment.”
James Mulva, chairperson of ConocoPhillips, said his firm is ”ready to open our records” to dispute allegations of ”price gouging”. ConocoPhillips earned $3,8-billion in the third quarter — he said that represents only a 7,7% profit margin.
”We do not consider that a windfall.”
‘Political theatre’
Senators lined up to assail the firms.
”The stories of price-gouging of gasoline consumers in the aftermath of the hurricanes are unacceptable and it is time to explore policies or laws which will prevent this from occurring in the future,” said Republican Olympia Snowe from Maine. Onlookers, though, questioned how much substance there was behind the rhetoric, describing it as political theatre.
Senators also urged the oil firms to invest more in refining capacity. The country was left looking vulnerable when the hurricanes knocked out much of its domestic oil production and forced the US to rely on emergency supplies from Europe. It is a topic to which the White House has warmed.
”It’s important for the private sector to be good corporate citizens and invest in the energy infrastructure. That means investing in expanding refining capacity,” spokesperson Scott McClellan said at a separate press conference.
Raymond said Exxon Mobil’s capital expenditure and spending on research and development has been consistent, whether the price of oil was $10 a barrel or $70 a barrel. In a barbed comment, he said: ”In politics, time is measured in two, four or six years, based on the election cycle. In the energy industry, time is measured in decades, based on the life cycle of our projects.” — Guardian Unlimited Â