Thursday, November 10, 2005
Domenici, Bingaman Question Oil Industry Execs About Profits
By Michael Coleman
Journal Washington Bureau
WASHINGTON The U.S. Senate had oil company executives right where the American public wanted them Wednesday on a congressional hot seat facing hard questions about high gasoline prices.
But the heavy grilling never materialized.
The oil company heads made a convincing case that the prices compared to profits are not as sinister as they sound, according to Sen. Pete Domenici, R-N.M., chairman of the Senate Energy and Natural Resources Committee.
"All their statements taken together produce a pretty credible picture of companies involved in a worldwide business ... and there was reasonable evidence that they do invest their money in production," Domenici said in an interview.
The hearing before the energy committee aimed to force chief executives of major oil companies to justify record gas prices at a time when they are also reaping record profits.
In all, American oil companies posted combined quarterly profits of nearly $30 billion in the past quarter alone.
Domenici said the executives owed Americans an explanation.
Industry insiders testifying Wednesday argued that the profits are mostly plowed into new oil fields and technology.
The oil officials tried to explain the high prices, but it was unclear afterward what results the Senate session would produce for consumers at the gas pump.
Sen. Jeff Bingaman of New Mexico, the top Democrat on the committee, was among the other senators on the panel.
He said he supports giving the Federal Trade Commission more authority to investigate price gouging, but he isn't convinced the big oil companies are doing so.
"I have not seen evidence that these large companies are gouging," Bingaman said in an interview.
However, Bingaman added, "There is good evidence that individual dealers at local levels are raising prices (during natural disaster and other emergencies) to unconscionable levels."
Bingaman said state attorneys general are best equipped to crack down on unscrupulous dealers at the local level.
Bingaman also sought assurances from the oil executives that they would help the government pay for a major media campaign to promote fuel conservation in America.
The oil executives' responses to Bingaman's question, while affirmative, were "mushy" at best, he said.
Industry insiders stressed that gas prices are set under a complex set of scenarios that involve foreign governments, commodities speculators and other factors. Furthermore, U.S. regulatory and environmental barriers force American companies to spend money all over the globe in the search for oil.
Chevron chief executive officer David O'Reilly said his company earned $31.6 billion since 2002, and invested $32 billion.
"We've invested what we've earned," he told the energy committee.
The industry's financial figures reflect its size and the world's growing demand for oil, they argued.
"Our numbers are huge because the scale of our industry is huge," said Lee R. Raymond, chief executive officer of Exxon Mobil Corp., which just posted its own record quarterly profit of $9.9 billion.
Domenici tried, and by his own admission failed, to get the panelists to explain in two or three sentences how fuel prices are set. The New Mexico Republican said it was the top question his constituents ask him on visits home.
But after several executives launched into long-winded explanations, Domenici gave up.
"I'm not sure my constituent is pleased with those answers," Domenici said, referring to consumers.
A woman in the audience spontaneously shouted: "No, we're not!"
Sen. Barbara Boxer, D-Calif., created a small stir when she asked the executives if they would donate a "significant contribution" from their multimillion dollar salaries to a fund that would help Americans with gas prices.
Sen. Ted Stevens, R-Alaska, intervened and said the question wasn't relevant to the hearing. The witnesses never answered.
Neither Domenici nor Bingaman said he would support a proposal to impose a windfall tax on oil company profits because it could hamper domestic production.
"It didn't work before and it probably won't work again," Domenici said at the outset of the hearing.