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EnlargeOil company executive, J. Stephen Simon of Exxon Mobil, left, accompanied by fellow executives, John Hofmeister of Shell Oil, Peter Robertson of Chevron, John Lowe of ConocoPhillips, and Robert Malone of BP America, testifies on Capitol Hill in Washington, Tuesday, April 1, 2008, before a House Energy and Commerce Committee hearing on oil and gasoline prices, oil company profits and the need for renewable fuels. Associated Press © 2008
Ignacio Vergara, 43, of Tampa, Fla., sits in the shade near his parked truck Tuesday morning, April 1, 2008 near the Port of Tampa, Fla. The Owner-Operator Independent Drivers Association says many of its members believe diesel prices at more than $4 a gallon is making it difficult for them to stay in business. Associated Press © 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 Fool’s 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.”
Several lawmakers noted the rising price of gasoline at the pump, now averaging $3.29 a gallon amid talk of $4 a gallon this summer.
“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 including representatives of BP America Inc., Chevron Corp. and ConocoPhillips.
While Democrats hammered the executives for their profits and demanded they do more to develop alternative energy sources such as wind, solar and biofuels, Republican lawmakers called for opening more areas for drilling to boost domestic production of oil and gas.
What would bring lower prices? asked Rep. James Sensenbrenner of Wisconsin, the committee’s ranking Republican
“We need access to all kinds of energy supply,” replied Robert Malone, chairman of BP America, adding that 85 percent of the country’s coastal waters are off limits to drilling.
But Markey wanted to know why the companies aren’t investing more in energy projects other than oil and gas — or giving up some tax breaks so the money could be directed to promote renewable fuels and conservation and take pressure off oil and gas supplies.
“Why is Exxon Mobil resisting the renewable revolution,” asked Markey, noting that the other four companies together have invested $3.5 billion in solar, wind and biodiesel projects.
Exxon is spending $100 million on research into climate change at Stanford University, replied Simon, but current alternative energy technologies “just do not have an appreciable impact” in addressing “the challenge we’re trying to meet.”
The appearance Tuesday before the Select Committee on Energy Independence and Global Warming was not the first time that oil executives had faced the harsh words of a lawmakers frustrated over their inability to do anything about soaring oil and gasoline costs.
In November 2005, executives of the same companies sought to explain high energy costs at a Senate hearing at which Hofmeister emphasized the cyclical nature of his industry. “What goes up almost always comes down,” he told the senators on a day when oil cost $60 a barrel.
About six months later, the executives were grilled again on Capitol Hill when a barrel of oil cost $75. As the three-hour House hearing came to a close Tuesday, the price of oil settled at just over $100 a barrel on the New York exchange.
“We face a new reality, volatility, high prices, greater competition for resources,” said Peter Robertson, vice president of Chevron Corp., adding that he understands that “Americans see the pain” of $100-a-barrel oil.
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.
They responded that their companies already are spending on alternative energy projects and argued that new taxes would dampen investment and could lead to even higher prices.
“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,” said Simon. He said over the past five years Exxon Mobil’s U.S. tax bill exceeded its U.S. earnings by $19 billion.
Markey was not impressed.
“These companies are defending billions of federal subsidies … while reaping over a hundred billion dollars in profits in just the last year alone,” he said. The companies are reaping “a windfall of revenue” while poor people have to choose between heating and eating because of high energy prices.
Elsewhere on Tuesday, many independent truckers parked their rigs and others slowed to a crawl on highways to protest high fuel prices. The demonstrations were only scattered, but long lines of trucks were moving at about 20 mph on the New Jersey Turnpike, and three drivers were ticketed for impeding traffic on Interstate 55 outside Chicago, driving three abreast at low speeds.
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Shares Down Slightly as Oil Prices Rise
By THE ASSOCIATED PRESS
Published: April 2, 2008
Wall Street turned lower Wednesday as investors worried that a jump in oil prices could be another signal that consumers are under stress in an economy that is already showing signs of a recession.
The major indexes, which spent most of the session in a tight trading range, tumbled after oil prices shot higher in response to the Energy Department’s report of an unexpected jump in gasoline demand. Crude oil rose $3.85 to settle at $104.83 a barrel in New York trading.
In late afternoon trading, the Dow Jones industrials fell almost 100 points, before finishing 45.44 points lower, to 12,608.92 after changing direction several times. Broader market indexes also fell. The Standard & Poor’s 500-stock index and the Nasdaq composite index were down less than one percent.
Surging demand for oil is likely to send prices at the pump higher, a troublesome trend given that retail gas prices are expected to rise further as the summer approaches and put more financial pressure on consumers.
“The oil uptick took away some of the optimism that we’ve seen recently,” said Richard Cripps, chief market strategist for Stifel Nicolaus. “Higher gasoline price would mean less in the pocket for Americans, and there’s also continued worries about a recession.”
The credit crisis and weak economy have sent stocks tumbling in the last six months. But the market had shown some renewed confidence that the worst of the credit problems might be behind Wall Street; that upbeat sentiment sent stocks up nearly 400 points on Tuesday, the first day of the second quarter.
Some of the pullback late Wednesday also was attributed to profit taking.
In the commodities market, corn prices climbed to a record just below $6 a bushel as cold, wet weather in the Midwest threatened to slow planting, adding to concerns over tight supplies.
Heavy rains and some snowfall in corn-growing states in the Midwest and the South are expected to continue into the weekend, raising the possibility that growers will have to postpone spring planting. That would only increase an already acute supply crunch for corn, which has shot up in value amid soaring demand to make ethanol and feed livestock.
“We’re going to start trading the weather here,” said Jason Ward, analyst with Northstar Commodity in Minneapolis. “The rainy weekend means that some corn growers may switch acres over to beans, and it also raises the risk that there will be lower corn yields.”
Corn for May delivery jumped 12.75 cents to $5.9675 a bushel in Chicago trading, after earlier rising to a record $5.99 a bushel.
Corn has surged 25 percent this year and appears poised to keep rising after the federal government on Monday predicted a sharp drop in corn planting. In its annual planting report, the Department of Agriculture projected that farmers will plant 86 million acres of corn, an 8 percent drop from last year.
Wheat for May delivery jumped 31 cents to $9.26 a bushel, while May soybeans rose 22 cents to $12.33 a bushel.