WASHINGTON -- As oil prices surged to a record $134.10 a barrel on Wednesday, up more than 34% so far this year, the U.S. Senate Judiciary Committee once again grilled top oil executives about high gasoline prices. Also, President Bush signed a bill suspending the addition of oil to the Strategic Petroleum Reserve (SPR), and the House approved legislation allowing the U.S. Department of Justice (DOJ) to sue members of the Organization of Petroleum Exporting Countries (OPEC).
"Where is the corporate conscience?" Senator Dick Durbin (D-Ill.), asked Robert A. Malone, chairman and president [image-nocss] of BP America Inc.; John Hofmeister, president of Shell Oil Co.; Peter J. Robertson, vice chairman of Chevron Corp.; John E. Lowe, executive vice president of exploration and production for ConocoPhillips; and J. Stephen Simon, senior vice president of
Exxon Mobil Corp. at the hearing.
The company leaders cited supply and demand and tried to shift attention from motorists' anger over $4-a-gallon gasoline to a debate over new areas for drilling. But senators pressed the executives about public anguish over paying $60 or more to fill up a car's gasoline tank, said the Associated Press.
"People we represent are hurting, the companies you represent are profiting," Sen. Patrick Leahy (D-Vt.), told the executives. He said there is a "disconnect" between legitimate supply issues and the oil and gasoline prices motorists are seeing.
The executives, sitting shoulder to shoulder in the hearing room, said they understood people were hurting, but they tried to blunt the emotion with economic analysis.
Profits have been huge "in absolute terms," conceded J. Stephen Simon, executive vice president of Exxon Mobil Corp., but they "must be viewed in the context of the massive scale of our industry." And high earnings "in the current up cycle" are needed for investments in the long term, including when profits will be down. "'Current up cycle,' that's a nice term when people can't afford to go to work" because gasoline is costing so much, replied Leahy with sarcasm.
"The fundamental laws of supply and demand are at work," said Hofmeister, acknowledging it is something the oil industry has been saying for some time and that the explanation may sound "repetitive and uninteresting."
Simon was asked what his total compensation was at Exxon, a company that made $40.6 billion last year. Simon replied it was $12.5 million. Lowe said he didn't recall his total compensations. So did Peter Robertson. Hofmeister said his was "about $2.2 million." Malone put his "in excess of $2 million."
Sen. Arlen Specter (R-Pa.), noting that Exxon's profits had nearly quadrupled from $11.5 billion in 2002, said he had heard nothing from the oilmen that would explain "why profits have gone up so high when the consumer is suffering so much."
The executives, appearing under oath, cited tight global supplies with scant spare production capacity and the fact that large areas of land and offshore waters remain off limits to drilling. And they said they are worried Congress was talking of requiring the five companies to pay more taxes. "I urge you to resist these punitive policies," said Hofmeister.
You have "just a litany of complaints that you're all just hapless victims of a system," Sen. Dianne Feinstein (D-Calif.), told the executives. "Yet you rack up record profits...quarter after quarter after quarter."
One senator after another cited the pain that high energy prices are causing farmers, small businesses and people trying to find a way to afford a vacation trip this summer. "Is there anybody here that has any concerns about what you're doing to this country with the prices that you're charging and the profits that you're taking?" Durbin asked.
"Senator," replied Simon, "We have a lot of concern about that. And we're doing all we can to put downward pressure on prices."
Click hereto view the oil executive's prepared testimony.
Meanwhile, the president has signed H.R. 6022, the Strategic Petroleum Reserve Fill Suspension & Consumer Protection Act of 2008, which suspends temporarily the acquisition of crude oil for the SPR.
Congress voted overwhelmingly last week to order the administration to stop new deliveries to the emergency oil stockpile for six months in order to try to bring the price of gasoline down, reported CNN. The bill passed with veto-proof majorities in both houses of Congress.
The White House does not believe the measure will affect gasoline prices, but the president will not stand in its way, White House spokesperson Scott Stanzel told the news outlet. "He hopes that this vote on the SPR will not distract members [of Congress] from the things they could be doing that would actually make a difference, like opening up new domestic supply in an environmentally sensitive way" in Alaska's Arctic National Wildlife Refuge (ANWR) and the outer continental shelf off the U.S. coast, he added.
The U.S. Department of Energy (DOE) pre-emptively decided Friday not to purchase oil for the SPR from July to December in case the bill became law, spokesperson Megan Barnett told CNN.
Estimates for how much cutting off additions to the SPR would save consumers on a gallon of gas range from a few pennies to 25 cents. The U.S. Energy Information Administration (EIA) predicts oil prices would fall by only about $2 a barrel, shaving 4 to 5 cents a gallon off the price of gas if deliveries to the SPR are suspended.
Bush Friday urged Saudi Arabia, the world's largest oil producer, to increase output, but he was rebuffed for the second time this year, CNN said. The kingdom said there is not enough demand from its customers.
Also, the House overwhelmingly approved legislation on Tuesday allowing the DOJ to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure, reported Reuters. The bill would subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.
The measure passed in a 324-84 vote, a big enough margin to override a presidential veto. The legislation also creates a Justice Department task force to aggressively investigate gasoline price gouging and energy market manipulation.
"This bill guarantees that oil prices will reflect supply and demand economic rules, instead of wildly speculative and perhaps illegal activities," said Representative Steve Kagen (D-Wis.), who sponsored the legislation. He said Americans "are at the mercy" of OPEC for how much they pay for gasoline, which this week hit a record average of $3.79 a gallon.
The White House opposes the bill, saying that targeting OPEC investment in the United States as a source for damage awards "would likely spur retaliatory action against American interests in those countries and lead to a reduction in oil available to U.S. refiners."
The administration said less oil going to refineries would limit available gasoline supplies and raise fuel prices.
Foreign investment in U.S. oil infrastructure has declined in the last decade. But the state-owned oil companies of several OPEC nations are owners of U.S. refineries, and those investments could be affected if the legislation becomes law, said Arlington, Virginia-based FBR Capital Markets Corp.
The bill also requires the Government Accountability Office (GAO) to carryout a study on the effects of prior oil company mergers on energy prices.The Senate would still have to approve the House measure, said the report. The Senate previously approved similar legislation as part of a broad energy bill; however, the OPEC-suing provision was removed after White House opposition in order to get the underlying energy legislation signed into law.
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