WASHINGTON -- The top executives of the five biggest oil companies were on the hot seat yesterday, testifying at the Senate Committee on Finance for a contentious hearing entitled Oil & Gas Tax Incentives & Rising Energy Prices (click here to watch a video replay of the hearing and to read prepared testimony).
ExxonMobil CEO Rex Tillerson, ConocoPhillips CEO Jim Mulva, Shell Oil Co. U.S. president Marvin Odum, BP America chairman Lamar McKay [image-nocss] and Chevron CEO John Watson listened stoically and responded sometimes feistily and sometimes defensively as Democratic senators tore into them over so-called subsidies, incentives or tax breaks, which they seek to eliminate, and as Republican senators tried to offer a more friendly line of questioning to help them make their case in defense of the tax breaks.
Visual aids and metaphors were the order of the day as Senator Orrin Hatch (R-Utah) set the stage by quoting a David Letterman gasoline-price joke about rats carpooling from New Jersey and with a slide depicting a dog riding a pony--indicating that he believed the hearing was a "dog and pony show" and "political theater."
Sen. Chuck Schumer (D-N.Y.) picked up the zoological theme, saying, "You'd have an easier time convincing the American people that a unicorn just flew into this hearing room than that these big oil companies need taxpayer subsidies. That's the real fairy tale."
Next up, Sen. Pat Robert (R-Kansas) said that it was "very difficult to follow the unicorn from New York, who has a very sharp horn. Are you all right over there [he asked the oil executives]? Sometimes a unicorn can sort of morph into a rhinoceros."
One heated exchange involved Sen. Robert Menendez (D-N.J.)--already angered by Hatch's New Jersey rat joke--and ConocoPhillips' Mulva. The company put out a press release earlier this week implying that anyone who wanted to remove the tax breaks was "unAmerican." Menendez pressed Mulva hard, repeatedly demanding an apology, which he did not receive. Mulva would only say "nothing was intended personally," and that the release meant that ending the tax breaks would cost jobs, discourage investment and hurt the country.
The politicians cited consumer anger over $4 gasoline, and attempted to paint the oil company leaders as being, in the words of Sen. Jay Rockefeller (D-W.Va.), "deeply, profoundly out of touch" with mainstream Americans.
The senator added, "Not once during this hearing have I heard any semblance of a willingness to share unless every [other type of U.S.] company also has to. I haven't heard anybody talk about what they are doing--what they would be willing to do--to share in our budget problem. The total concept of what keeps America together...is a sense of fairness, that everybody has to lose at some point, everybody has to give something up to be a real country."
Chevron's Watson countered, "The American people don't want shared sacrifice. I think the American people want shared prosperity." Earlier, he said, "Don't punish our industry for doing its job well."
Several senators quizzed the oilmen over current high gasoline prices, and whether eliminating the tax breaks would cause them to decrease or increase. The executives attempted to distance themselves from the notion that they can directly influence those prices, but admitted that they believed the prices would rise if the tax breaks were taken away.
Shell's Odum said, "Oil companies are price takers, not price makers."
When asked why gasoline prices rise fast with the price of oil, but fall more slowly when oil prices drop (sometimes called "rockets and parachutes"), Tillerson gave a clear explanation of how pricing works in the petroleum supply chain down to the pump.
And the executives made several pleas for domestic and offshore drilling while trying to counter the senators' reasons for wanting to end the tax breaks. "Arbitrarily punishing five U.S. oil and gas companies by raising their taxes will generate far less government revenue than if we were allowed to compete and produce our nation's resources," said Tillerson.
The politicians also went after speculators, who don't actually ever "touch" the oil, seeking to nail down the role they play in gasoline prices. The oilmen distanced themselves from those activities.
Meanwhile, a CSP Daily News poll on Thursday asked, "The CEOs of ExxonMobil, ConocoPhillips, Shell, BP and Chevron will testify before Congress about oil company earnings and rising energy prices. Do you believe that such hearings have been productive in the past?" Of the nearly 180 votes by press time, 69% said "no, they have been a waste of time"; more than 21% said "no, not really"; more than 6% said "yes, they have been somewhat productive"; nearly 4% said "maybe"; and no one said "yes, they have been very productive."
(Be sure to vote in today's CSP Daily News poll on this issue.)
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