Oil Executives Defend Enormous Profits Before Senate

WASHINGTON — On a day oil prices leaped to unheard-of highs, senators lined up Big Oil's biggest executives and pummeled them with complaints that they're pretending to be "hapless victims" while raking in record profits.

"Where is the corporate conscience?" Sen. Dick Durbin, D-Ill., asked the top executives of the five largest U.S. oil companies.

It's all about economics, came the reply. Supply and demand. The company leaders tried to shift attention from motorists' anger over $4-a-gallon gasoline to a debate over new areas for drilling.

But senators at the Judiciary Committee hearing weren't having any of that. They wanted to press the executives about public anguish over paying $60 or more to fill up a car's gas tank.

"People we represent are hurting, the companies you represent are profiting," Sen. Patrick Leahy, D-Vt., told the executives. He said there's a "disconnect" between legitimate supply issues and the oil and gasoline prices motorists are seeing.

The executives, sitting shoulder to shoulder in the hearing room, said they understood people were hurting, but they tried to blunt the emotion with economic analysis.

Profits have been huge "in absolute terms," conceded J. Stephen Simon, executive vice president of Exxon Mobil Corp., but they "must be viewed in the context of the massive scale of our industry." And high earnings "in the current up cycle" are needed for investments in the long term, including when profits will be down.

"'Current up cycle,' that's a nice term when people can't afford to go to work" because gasoline is costing so much, replied Leahy with sarcasm.

"The fundamental laws of supply and demand are at work," said John Hofmeister, chairman of Shell Oil Co., acknowledging it is something the oil industry has been saying for some time and that the explanation may sound "repetitive and uninteresting."

Hofmeister was joined by executives of Exxon Mobil Corp., Chevron Corp., BP America Inc. and ConocoPhilips Co. Together the five companies earned $36 billion during the first three months of this year.

As the executives sought to explain their profits and why prices are so high, the global oil markets were moving into new, uncharted highs, touching $133 a barrel for the first time. The national average price of a gallon of gasoline hit $3.80, with $4 showing up in more places. Crude prices increased even more in late electronic trading Wednesday hitting $134 for the first time.

It was the second time this year the executives had been summoned to testify before Congress. When they came in early April oil cost about $98 a barrel.

This time the exchanges got personal.

Simon was asked what his total compensation was at Exxon, a company that made $40.6 billion last year. Simon replied it was $12.5 million.

John Lowe, executive vice president of ConocoPhillips Co., said he didn't recall his total compensations. So did Peter Robertson, vice chairman of Chevron Corp. Hofmeister said his was "about $2.2 million" but was not among the top five salaries at his company's international parent. Robert Malone, chairman of BP America Inc., put his "in excess of $2 million."

Sen. Arlen Specter, R-Pa., noting that Exxon's profits had nearly quadrupled from $11.5 billion in 2002, said he had heard nothing from the oilmen that would explain "why profits have gone up so high when the consumer is suffering so much."

The executives, appearing under oath, cited tight global supplies with scant spare production capacity and the fact that large areas of land and offshore waters remain offlimits to drilling. And they said they're worried Congress was talking of requiring the five companies to pay more taxes.

"I urge you to resist these punitive policies," said Hofmeister.

It was not what many senators wanted to hear.

You have "just a litany of complaints that you're all just hapless victims of a system," Sen. Dianne Feinstein, D-Calif., told the executives. "Yet you rack up record profits ... quarter after quarter after quarter."

One senator after another cited the pain that high energy prices are causing farmers, small businesses and people trying to find a way to afford a vacation trip this summer.

"Is there anybody here that has any concerns about what you're doing to this country with the prices that you're charging and the profits that you're taking?" Durbin asked.

The titans of America's oil industry sat quietly for a moment.

"Senator," replied Exxon's Simon, "We have a lot of concern about that. And we're doing all we can to put downward pressure on prices."

Comments

[spokensoftly]

Yes we did make billions and there is nothing you can do about it.

[Southrnbelle]

It's really amazing!

OPEC, these CEO whores - they are all just sitting back on their filthy rich, fat behinds, laughing their asses off.

[castlerider]

What really needs to happen is hydrogen based fuel. some that can be derived from believe it or not, WATER!

Check out this link:

http://www.runyourcarwithwater.com/?hop=cd16car

[castlerider]

'These jerks thumb their noses to America, and every decent, hadr working American.
These elected representatives are supposed to represent all of us, hard working Americans....

So why aren't they saying something like: "As a grave matter and concern and as a result of the severe urgency to our nation, we will be confiscating your profits and making a national share for the betterment of the nation until further notice."

That sure as hell would get their attention... You think it's illegal? Not any less legal then half the things the Bush adminstration has done to average, hard working Americans in this country ever since the chump has taken office.

.

[David]

This is the second time the oil execs appeared before the committee. And for all the bluster the Durbin, Leahy, Feinstein and the rest of the Senate Judiciary Committee showed. It was nothing more than a dog and pony show. The committee has no power. All they do is act concerned and do nothing.

[mouselion]

All We The People >can< do is say something to them.

[mimagman]

Re Big Pharma: Like Big Oil, the pharmaceutical industry has no social conscience...it's all about profits, people be damned. Perhaps if they spent more time attempting to develop drugs actually needed to combat serious diseases and less on "me too" copies of drugs on which their patents are expiring, they could focus their billions of dollars of profits more expediently. Anyone interested in the insidious co-option of the health care field, including providers, researchers, and academic journals, should read "Our Daily Meds."

[RoloTomassi]

Enough of this Peak Oil justification BS; most of us know in our gut that this is price/supply manipulation, plain and simple.

Thanks to vippy for bringing this to light:

"There"s a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." National Gas Week, Sept. 5, 2005

Full story here:

http://www.star-telegram.com/ed_wallace/story/651928.html

Contact your congressman NOW.

[uvymopkq]

Everybody wants more oil, correct? Barack Obama, Hillary Clinton, John McCain need to be asked -- and they should be forced to answer this question -- why do you want the Saudis to pump more oil? Why do you want OPEC to pump more oil? Tell us, if you want our votes, speak up, why do you want more oil in the market? When all three of you are proposing various forms of legislation that would punish oil and try to get rid of oil and to raise taxes on everybody. Obama's crazy statement last week that the world is no longer going to let us get away with keeping our homes at 72 degrees and driving our SUVs around and eating what we want. You've got the leading Democrat Party presidential candidate running around telling America just like Jimmy Carter, you have to learn to do with less. We are going to face a rollback of our lifestyle. This guy is a product of his environment, he's traveling around in these elitist circles and he's bought hook, line, and sinker the notion that we are despised and hated, and that's why he keeps making stupid statements such as he'll meet unilaterally without preconditions with anybody on the face of the earth, because he thinks we have to do that in order repair our image with all these people. This guy is an empty suit.

[mouselion]

1. The U.S. is despised by most of the world.
2. The U.S. is living beyond its means.
3. You are going to face an even greater rollback in your lifestyle if we continue to keep our heads in the sand.

[levi501]

What a bunch of crap! These arrogant politicians are the real greedy ones. Who does congress think they are?

Money is the reason entrepreneurs go into for profit business. Somehow we have let liberals and socialists define the pursuit of profit as a morally corrupt idea. Profit is the fuel of our capitalistic society and oil is the fuel of our economy. Oil companies have done more for our nation than Barbra Boxer could ever do...

Yes, government should regulate monopolies and collusion. But oil is far from a monopoly and congress should just get out of the way! Our country will fail if government dictates how much profit is acceptable...

[PierreLeClerke]

So your position is regulate monopolies and collusion right. We have anti-trust laws on the books now. When the oil companies jointly decided to reduce domestic refining capacity to increase margins, did you consider that free market activities or market manipulation?
When the majors BP/Exxon/Conoco Phillips blocked a natural gas pipeline from their Alaskan fields to keep the huge volume there off the market, did you consider that, a free market "Lawful" act?

And when the majors trade and retrade their own crude stocks with shell companies that never take physical possession of the product, is that an open free market activity?

Inventories are at record, I said RECORD levels. Take advantage of the Energy Information Agencies weekly web reports on inventories and production. Do the research on your own.

If you educate your self you will be forced to face the facts. This is unbridled greed at levels never before experienced in human history.
If you still persist in your industry propaganda, please disclose that your a profiteer and be honest.

[RTIII]

Thanks for this post...

[realpolitic]

The oil executives know they are protected by their friend in the Oval Office and by Vice-President Cheney. I am surprised that do not claim Executive Privilege and refuse to testify.

[adavis08]

This country only has ourselves to blame. We should have been developing other forms of energy before we needed so badly. It might sound solcialist but the Feds should place a ceiling on the price of gasoline, and regulate the profits that Oil companies are making, just until other forms of energy are developed. The Oil Compaines don't care how high the price goes...it just means more profits and bigger CEO retirement packages. The Congress has to do more than talk. These prices are going to bring out chaotic situations if allowed to go unchecked.

[RTIII]

No, we don't have ourselves to blame; we have the mostly Republican led congress to blame. Since the oil-crisis of the 1970s, it's been very nearly non-stop Republican rule. The Republicans have intentionally denied us a sensible energy policy - CAFE standards, allowing SUVs to be treated as trucks and not (as they're used) "cars". One could go on and on and on at all the things the Republicans have done to ensure there was no enlightened policy.

So, blame it on the voters? Well... We've had stolen elections. We've had MAJOR media consolidation - down to about 90+% of all media owned by SIX people! (This, of course, keeps people uninformed.) We've had cynically motivated divisive culture-war issues crammed down our throats, all in efforts to keep people from voting in their own self interests.

No, we can kick "ourselves" for what has happened, but make no mistake; this was intentional manipulation by the Republicans and their corporate sponsors.

[levi501]

In the short run a price ceiling will benefit consumers and hurt oil companies. However, in the long run a price ceiling will create a shortage. Do you think there are other alternatives?

The price of gas going higher does not mean greater profit. If the cost of refinement (oil) increases profit will remain steady.

If congress would bud out the market will adjust to the most efficient outcome. Yes, you may have to change your driving habits but life will go on...

[PierreLeClerke]

Levi, there is no shortage. Go to the EIA website and sign up for your weekly inventory report. Don't take my word for it. Your government compiles domestic inventory and production data you should all find enlightening.
Inventories are at record highs, this is unbridled greed at an exquisite height. Enjoy the ride!

[Chris]

Why do the Oil companies sned the CEo and not the CFO to these hearings. The CFO woudl be abel to better expalin the financial results. The CEO's will only know the basics.

Congress shoudl talk to the CFO's as well. But when was the last time congress did anything.

Just cuioous what other comapnies is congress going to "scold" for having margins that are barely unchanged for the past three years?

[MacTheBlogger]

Moot point.

This ain't about business/economics. It's about politics. The politicians wanted punching bags for the cameras. They could have dragged some Exxon janitors out there, it doesn't matter. They weren't actually trying to ACCOMPLISH anything.

[MacTheBlogger]

Actually, things are playing out precisely as they should.

Oil prices are spiking due to (1) supply & demand issues, (2) increased costs of obtaining of needed materials & resources, (3) understandable supply uncertainties due to global socio-political issues, and (4) hyperactivity in the speculative futures markets due to all of the above.

As a result, the market is (1) decreasing demand for gas, (2) becoming far more aggressive and creative in exploring alternative sources of energy, (3) eschewing the gas-sucking pickups and SUV's and moving towards far more fuel-efficient vehicles, and (4) becoming more aware and careful in the usage of all forms of energy. Good for us.

The most intelligent thing to do would be to let the market breathe and find new and better ways of creating and using energy. It's happening right now, and will continue if we let it.

Oh, wait. I'm on political website. I guess I should be saying something like "Boo hoo, it's all the rich guy's fault, we have no control, we're victims, tax them more, they're meanies, we need the government to make us happy."

Just wanted to fit in.

[PierreLeClerke]

One more urgent element, remove the fire in the Middle East, the U.S. occupation force.
and begin honest dialog with every Nation we have attempted to manipulate and control both directly and through straws for the purpose of coveting their resources and justifying enormously gross and deceptive crude oil prices.

[adavis08]

True if we got out of the Middle East ..see how fast oil prices would fall.

[MacTheBlogger]

Indeed, this insane war has done much to exacerbate geo-political tensions, and therefore indirectly the price of oil. Our not being there would help, in more ways than the wasted money and lives of our young.

[racetoinfinity]

I could poke a thousand holes in your arguments, but for now, I'll just say: do you know how much corporate welfare the oil companies get from the government - how many tax breaks and depletion allowances, etc.? "Free" market, my posterior!

And, by the way, the naive faith in the "free" market and opposition to regulation is one of the reasons we are in the recession we're in.

I'll give you two reasons for the record profits of the oil industry: Cheney/Bush cronyism and corruption, and pure oil-fashioned GREED, short-sighted, and destructive of our planet.

[MacTheBlogger]

Well, I must admit, I like your ideas more. It's the Greedy Greedy Meanies. Sure takes up less screen space, and it requires far less effort in terms of calmly learning and understanding markets and business in general. Just go political.

Well done!

[mouselion]

(Market forces notwithstanding):

Nah, nobody greedy has ever been attracted to the oil industry. Gosh! What were we thinking?

Hmm, every entity in our economy is equal -- bubble gum manufacturers have as much as clout in government as oil companies, of course!

[PierreLeClerke]

You should add to your mantra that this is a "FREE MARKET" and there is NO evidence of manipulation in this market right.

And if you believe that line yourself, your a fool.

The centralized energy market is the single most manipulated, protected and powerful monopoly on the planet. The present executive branch is a wholly owned subsidiary of same.

Sell off 20% (140,000,000) barrels of the S.P.R. to domestic refiners only for domestic resale only at $45.00 per barrel and see what a bit of real market competition can do to these barons.
Use the $6,000,000,000 generated from the sales to fund $5,000-$10,000 instant rebates to buyers of vehicles that achieve over 50mpg on a sliding scale to 100mpg for the $10,000 incentive.
Manufacturers will be rolling 50mpg+ vehicles off the assembly line within 6 months if you create real incentives.
Match that $6b with direct grants for manufacturing products such as hydrogen generators that replace gasoline with clean renewable available products now. Put NASA in charge of that project and create jobs clean the environment and let your palls drown in their "Black Gold".

[Soulsurfer]

Too little too late, but you're right. We as consumers have to bear some responsibility for the problem, but the industry itself has fought higher fuel standards, emissions control, and has been subsidized and protected by the bought-off politicians. When everyone is broke and out of a job, who will pay for $10 a gallon gas?

[MacTheBlogger]

I'd think this would be obvious, but I'll say it anyway.

There is no such thing as a "free" market. Regulations are required to protect citizens and the markets themselves. The difficulty comes when trying to find a balance between appropriate and punitive regulation.

Americans are reacting to the rise in the price of gas, just as they should. And it's about freakin' time. American companies are, as we speak, racing to develop alternatives for us. If that we means we ultimately don't need the oil companies, great.

But reacting to a predictable problem with emotion and political hysterics does nothing to solve it.

[gemcando06]

Tax 'em Tax'em Never be afraid to tax'em.

Gasoline prices are on the way to $ 8.00 a gallon. To match Europe and the rest of the world. Nothing to stop them?

We must get green as soon as possible. This means a " Manhattan Project"
by the government to extract fuel from hemp, switch grass, sugar etc.
Forget the oil companies' progressing on this so long as the people will pay at the pumps.

[Darwin48]

And you were doing fine...right up unil your last paragraph, then you came off as just another jerk. Good job.

[MacTheBlogger]

Dang! I've gotta be more careful!

[missette]

This is all too reminiscent of the "energy crisis" in California back in 2000, conveniently just after Bush took office. Remember all the convoluted arguments why prices were spiking, and re-spiking? Supposedly it was all because of a lack of new refineries and the fact that America was too concerned about a clean environment. Of course, later we learned, as most of us suspected, the huge price increases were all the result of manipulation by Enron and other energy traders. But here we go again. A compliant MSM accepts the arguments of Big Oil and refuses to dig deeper, even though common sense tells us, just as it did back in 2000, that prices don't suddenly jump head over heels without significant help from corrupt and greed-driven markets. Please MSM. Stop the charade and start telling the truth.

[Chris]

Missette

Learn your history. Bush did not take office till January 2001. But why let the facts get in your way.

[missette]

I concede that you are correct. It began in May 2000 and ran through Sept. 2001. I will, though, maintain that my point is valid (and the problem did accelerate during Bush's tern). We will at some point discover that these spikes are not merely the result of inevitable market forces.

[RoloTomassi]

Which is why I am adamant about dismissing the Peak Oil Nuts; while their theory is certainly valid, they are unreasonably positive that Peak Oil is here and is the driving force behind all of this--but it isn't so.

Just as you've stated, the truth