WASHINGTON -- As high fuel prices roil consumers and Congress considers a variety of measures to ease the impact, Exxon Mobil Corp. and Royal Dutch Shell PLC, the world's No. 1 and No. 3 oil companies, weighed in with record third-quarter earnings that totaled almost $19 billion.
As a result, political pressure visibly built last week, according to a report in The Wall Street Journal. Sen. Bill Frist (R-Tenn.), the Senate majority leader, asked the chairmen of three Senate committees to investigate high energy prices and said he might support a [image-nocss] federal anti-price gouging law. "If there are those who abuse the free-enterprise system to advantage themselves and their businesses at the expense of all Americans, they ought to be exposed, and they ought to be ashamed," he said in a statement.
Between Exxon, Shell and BP, the companies' combined quarterly revenue of $177.16 billion exceeded Denmark's economic output last year. Signaling its awareness of the sheer size of the numbers and the resulting political concerns about how companies are benefiting from higher energy prices, Exxon ran an advertisement this past Thursday in some newspapers acknowledging that its earnings "are indeed at a record high" but arguing that "oil earnings are not out of step with other major industries."
Meanwhile, Energy Secretary Samuel W. Bodman told a Senate panel the Bush administration is considering taking steps to create a stockpile of refined products like gasoline, diesel and jet fuel, according to the WSJ report. That could include requiring the industry to set aside stocks of a variety of fuels that could be tapped in future crises. Industry officials said they oppose the idea, citing the expense and saying it could take badly needed fuels off the market, leading to higher prices.
Bodman also called for the industry to boost spending on refining to ease a capacity crunch that has contributed to a surge in prices for fuels refined from crude oil. He said the administration isn't considering a federal windfall-profit tax on the oil industry, similar to one the U.S. imposed during the 1980s, that has drawn recent attention on Capitol Hill. Yet industry officials remain nervous, because the political backlash against high fuel prices and oil-company profits appears to be forging an alliance between Democrats and Republicans that, particularly with President Bush's public support eroding, could give the idea momentum in Congress.
Industry officials say politicians are rushing to judgment, according to the WSJ report. They argue that the oil business is cyclical, that over the years they have invested in new production when commodity prices have been far lower than today, and that even increased investments in new capacity today won't yield more oil and gas for several years.
In a written statement that accompanied Exxon's earnings release Thursday, Lee Raymond, its chairman and chief executive, didn't mention the result was a record. Instead, he pointed out that the figure included "the impacts from hurricanes Katrina and Rita, two of the most significant U.S. natural disasters in recent history," stressed that his company "acted responsibly" in pricing gasoline at company-operated filling stations in the wake of the storms, and cautioned that "reduced volumes and higher costs" will "impact" Exxon's earnings in the fourth quarter.
"A policy maker, they operate on time frames of two, four and six years. We operate on time scales of a decade or more," said Kenneth Cohen, Exxon's vice president for public affairs. The long-term solution to the energy crunch, he said, is opening up new areas of the U.S. to energy production. "Rather than rush to what appears to be an attractive political solution, let's make sure we're making solutions that will prove to be viable in the longer term."
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