WASHINGTON—Hoping to fend off a potential windfall profits tax, leaders of the five biggest U.S. oil companies denied before two Senate committees on Wednesday that they gouged consumers while earning recent record profits.
The Senate Energy and Commerce committees called in five oil industry captains to explain their controversial combined third-quarter profits of $32.8 billion and what are expected to be industrywide annual profits approaching $100 billion. Those profits came from American consumers who paid more than $3 a gallon for gasoline this fall and face record home-heating costs this winter.
"My constituents, and actually most Americans, think that somebody rigs these prices. That in the process, somebody's getting ripped off, and they think it's them," said Energy Committee Chairman Pete Dominici, R-N.M., setting the stage for the nearly four-hour grilling.
Sen. Larry Craig, R-Idaho, was blunter.
"I must tell you, it's not terribly fun defending you," he said, adding that constituents besieged him at recent town hall meetings, demanding to know why Idaho's gasoline prices are 15 cents higher than the national average.
One by one, the executives recounted how hurricanes disrupted oil production and pipeline activity in the Gulf of Mexico and damaged oil refineries along the Gulf Coast. And they noted that even before hurricanes Katrina and Rita, a tight global market for oil supplies, caused partly by China's surging demand, had driven up gasoline prices around the world.
"We do not set or control the price of crude" oil, said John Hofmeister, president of Royal Dutch Shell's U.S. operations, which notched third-quarter profit growth of 68 percent over the same quarter in 2004. He was seconded by Ross Pillari, president of BP America Inc.
ConocoPhillips Chairman James Mulva warned against a Republican proposal to impose a windfall tax on their recent profits to help pay for home-heating assistance for the poor, suggesting it would discourage investment in finding new energy supplies.
"Singling out an industry is not necessarily a good precedent," he said.
Lee Raymond, chairman and CEO of ExxonMobil Corp., the world's largest private oil company, tried to shift the focus off profits.
"The petroleum industry's earnings are at historic highs today. But when you look at our earnings per dollar of revenue—a true apples-to-apples comparison—we are in line with the average of all U.S. industries," he said, adding that the oil industry is pumping profits back into exploration and production.
ExxonMobil drew consumer ire after posting third-quarter profits of nearly $10 billion, the largest quarterly corporate profit ever reported.
Some in the packed hearing room sported T-shirts that read "Expose Exxon." They hissed at Raymond's responses, and audience guffaws prompted Commerce Committee Chairman Ted Stevens, R-Alaska, to threaten to toss everyone out and go into private session.
Responding to a question about an alleged overnight 24-cent jump in wholesale prices charged to Virginia gas-station operators, Raymond acknowledged that ExxonMobil at times deliberately drove up wholesale prices to discourage consumption and avoid shortages. "It was a tough balancing act," he said.
The other executives didn't discuss whether they drove up prices. Shell had previously acknowledged that it rationed gasoline to distributors and retail outlets, leaving some stations dry in the Southeast.
To the visible shock of some Republicans, all five executives said under questioning by Sen. Ron Wyden, D-Ore., that they don't need the $2.6 billion in tax credits contained in energy legislation that President Bush signed over the summer. Wyden plans to try to revoke those tax credits.
Energy Chairman Dominici said the tax credits were intended to support smaller independent energy producers, mostly in Texas and Louisiana.
The hearing was delayed initially as Democrats tried unsuccessfully to have the five oil executives take an oath before testifying, implying they otherwise wouldn't be truthful.
Later, Sen. Barbara Boxer, D-Calif., brought out a chart showing the steep salaries and bonuses enjoyed by the witnesses. She asked if any of them would like to promise to use some of their bonuses to pay the energy bills of poor Americans. She got no takers.
Industry executives weren't afraid to push back.
Chevron Corp. Chairman David O'Reilly said Congress shares the blame for today's high prices because it disallows exploration of oil and natural gas reserves off U.S. coasts.
To the ire of Florida's two senators, he testified that Chevron had discovered enough natural gas off the Florida city of Destin to potentially power 1 million homes for 30 years, but for decades has been forbidden from drilling there and recently gave up its lease rights.
Instead, he said, the United States imports natural gas from Angola, and Angolan gas would soon be sent by pipeline to Florida from other U.S. cities.
"It is clear that the policy choices we've made in the past had consequences," he said.
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(c) 2005, Knight Ridder/Tribune Information Services.
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