Archive for Wednesday, April 2, 2008

Oil executives defend industry in House hearing

April 2, 2008


— Don't blame us, oil industry chiefs told a skeptical Congress.

Top executives of the country's five biggest oil companies said Tuesday they know record fuel prices are hurting people, but they argued it's not their fault and their huge profits are in line with other industries.

Appearing before a House committee, the executives were pressed to explain why they should continue to get billions of dollars in tax breaks when they made $123 billion last year and motorists are paying record gasoline prices at the pump.

"On April Fools' Day, the biggest joke of all is being played on American families by Big Oil," Rep. Edward Markey, D-Mass., said, aiming his remarks at the five executives sitting shoulder-to-shoulder in a congressional hearing room.

"Our earnings, although 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, senior vice president of Exxon Mobil Corp., which made a record $40 billion last year.

"We depend on high earnings during the up cycle to sustain ... investment over the long term, including the down cycles," he continued.

The up cycle has been going on too long, suggested Rep. Emanuel Cleaver, D-Mo. "The anger level is rising significantly."

Alluding to the fact that Congress often doesn't rate very high in opinion polls, Cleaver told the executives: "Your approval rating is lower than ours, and that means you're down low."

Beyond their control

Executives from ExxonMobil, Shell Oil Co., BP America Inc., Chevron Corp. and ConocoPhillips shifted blame for high prices to issues outside their control, including growth in global demand, geopolitical events, material and labor costs, the fall in the dollar's value and government restrictions on U.S. oil and natural gas resources.

Even some committee members said that restrictions on new oil drilling offshore may have contributed to rising gas prices because the U.S. consumes 25 percent of the world's oil, most of which is imported.

"We have made a choice as a nation to not advantage ourselves to our own oil supply," said Rep. Candice S. Miller, R-Mich.

Opening or improving existing areas of oil exploration could increase supply and lower demand, thus reducing prices at the pump, the panel was told.

"We need your help to open up the 85 percent of the Outer Continental Shelf that is now off limits to environmentally responsible oil and gas exploration and development," said Peter Robinson, a Chevron vice president. "We cannot expect other countries to expand their resource development to meet America's need when our government limits development at home."

The companies need to think of a better idea, said Judy Dugan, research director for Consumer Watchdog, a Santa Monica, Calif., consumer group.

"When the only idea that oil company executives can agree on for curing our energy woes is to open up the coast of California for oil drilling, it's proof that Congress has to take the reins," she said in an e-mail. "These hugely profitable companies continue to demand freedom to drill anywhere while they give lip service, if that, to renewable energy."

Alternative sources

Four of the five companies have invested in alternative energy, but the executives told the panel that oil would be a part of the U.S. economy for years to come.

"We must disavow the perception that alternative sources of energy can quickly fix the problem," said John Lowe, executive vice president of ConocoPhillips.

Democrats grilled Simon about ExxonMobil's relatively low contribution to alternative energy - $100 million of its $40 billion profit. Simon said his company does not believe that existing technology for alternative resources is viable and instead focuses on using oil more cleanly.

Chevron and BP America were praised for the steps they have made toward renewable energy.

"We knew we were in the carbon business and our business emits greenhouse gases," said Robert Malone, chairman of BP America. "Seven years later, it's still a problem."

But despite advances, said Shell president John Hofmeister, alternative energy hasn't become commercial enough yet to be profitable.

However, he said, "as we move up the maturity curve, I believe we'll make a lot of money on renewable energy.


Use the comment form below to begin a discussion about this content.

Commenting has been disabled for this item.