As gasoline nears $4 a gallon, Big Oil's profits questioned
Published: Tuesday, April 1, 2008 at 3:36 p.m.
Last Modified: Tuesday, April 1, 2008 at 3:36 p.m.
WASHINGTON - Top executives of the five biggest U.S. oil companies were pressed Tuesday to explain the soaring fuel prices amid huge industry profits and why they weren't investing more to develop renewable energy source such as wind and solar.
The executives, peppered with questions from skeptical lawmakers, said they understood that high energy costs are hurting consumers, but deflected blame, arguing that their profits — $123 billion last year — were in line with other industries.
"On April Fool's Day, the biggest joke of all is being played on American families by Big Oil," Rep. Edward Markey, D-Mass., said as his committee began hearing from the oil company executives.
With motorists paying a national average of $3.29 a gallon at the pump and global oil prices remaining above $100 a barrel, the executives were hard pressed by lawmakers to defend their profits.
"The anger level is rising significantly," said Rep. Emanuel Cleaver, D-Mo., relating what he had heard in his district during the recent two-week congressional recess.
Alluding to the fact that congressmen often don't rate very high in opinion polls, Cleaver told the executives: "Your approval rating is lower than ours and that means your down low."
"I heard what you are hearing. Americans are very worried about the rising price of energy," said John Hofmeister, president of Shell Oil Co., echoing remarks by the other four executives from Exxon Mobil Corp., BP America Inc., Chevron Corp., and ConocoPhillips.
But the executives rejected claims that their companies' earnings are out of step with other industries and said that while they earn tens of billions of dollars, they also invest tens of billions in exploration and oil production activities.
"Our earnings, though high in absolute terms, need to be viewed in the context of the scale and cyclical, long-term nature of our industry as well as the huge investment requirements," said J.S. Simon, Exxon Mobil's senior vice president.
But Markey asked Simon why Exxon Mobil hasn't followed the other companies in investing in alternative energy. The four other companies reported spending as much as $3.5 billion in recent years on solar, wind, biodiesel and other renewable projects.
"Why is Exxon Mobil resisting the renewable revolution," asked Markey.
Simon said his company, which earned $40 billion last year, had provided $100 million on research into climate change at Stanford University, but that current alternative energy technologies "just do not have an appreciable impact" in addressing "the challenge we're trying to meet."
Executives from the largest U.S oil companies have been frequent targets of lawmakers, frustrated at not being able to do much to counter soaring oil and gasoline costs.
In November, 2005, Hofmeister and the top executives of the same companies represented Tuesday sat in a Senate hearing room to explain high prices and their huge profits.
The prices are of concern, Hofmeister said at the time, adding a note of optimism: "Our industry is extremely cyclical and what goes up almost always comes down," he told the skeptical senators on a day when oil cost $60 a barrel.
About six months later, when the cost of the same barrel reached $75, the executives were grilled again on Capitol Hill on their spending and investment priorities.
Recently oil prices reached a peak of $111 a barrel. While declining a bit in recent days, the price remains above $100 and there's talk of $4 a gallon gasoline in the coming months.
Markey challenged the executives to pledge to invest 10 percent of their profits to develop renewable energy and give up $18 billion in tax breaks over 10 years so money could be funneled to support other energy and conservation.
The executives said the companies already are spending billions of dollars — more than $3.5 billion over the last five years — on renewable fuels such as wind energy and biodiesel, but rejected any tax increases.
"Imposing punitive taxes on American energy companies, which already pay record taxes, will discourage the sustained investment needed to continue safeguarding U.S. energy security," Simon insisted.
"These companies are defending billions of federal subsidies ... while reaping over a hundred billion dollars in profits in just the last year alone," complained Markey, chairman of the Select Committee on Energy Independence and Global Warming.
The House last year and again on Feb. 27 approved legislation that would have ended the tax breaks for the oil giants, while using the revenue to support wind, solar and other renewable fuels and incentives for energy conservation. The measure has not passed the Senate.
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