This has to be the only industry in the country that always makes a profit, no matter what, good economy, bad economy, etc.
Don't blame us for prices - oil execsBy Steve Hargreaves, CNNMoney.com staff writer
Last Updated: May 21, 2008: 3:47 PM EDT
Big Oil execs testified before the Senate Tuesday, saying high oil prices were largely out of their control and more drilling in the U.S. is needed.
The record-high price of gasoline is putting a strain on American motorists - and spurring some to shift their habits. Here are their stories.
OPECBig oil companiesSupply and demandThey are unavoidable or View results
NEW YORK (CNNMoney.com) -- Amid increasing public outcry over record-shattering oil and gas prices, senators on Wednesday hauled industry executives in to testify about the recent runup.
The Senate Judiciary Committee called the hearing to explore the skyrocketing price of oil, which jumped over $4 a barrel to a new record of over $133. The committee grilled executives from Exxon Mobil (XOM, Fortune 500), ConocoPhillips Co. (COP, Fortune 500), Shell Oil Co. (RDSA), Chevron (CVX, Fortune 500) and BP (BP) as to how their companies can in good conscience make so much money, while American drivers pay so much at the pump.
"You have to sense what you're doing to us - we're on the precipice here, about to fall into recession," said Sen. Richard Durbin, D-Ill. "Does it trouble any one of you - the costs you're imposing on families, on small businesses, on truckers?"
The executives said it did, and that they are doing all they can to bring new oil supplies to market, but that the fundamental reasons for the surge in oil prices are largely out of their control.
"We cannot change the world market," said Robert Malone, chairman and president of BP America Inc. "Today's high prices are linked to the failure both here and abroad to increase supplies, renewables and conservation."
Malone's remarks were echoed by John Hofmeister, president of Shell.
"The fundamental laws of supply and demand are at work," said Hofmeister. The market is squeezed by exporting nations managing demand for their own interest and other nations subsidizing prices to encourage economic growth, he said.
In addition, Hofmeister said access to resources in the United States has been limited for the past 30 years. "I agree, it's not a free market," he said.
The executives pushed the idea that large parts of the U.S. that are currently closed to drilling - like sections of Alaska, the Rocky Mountains and the continental shelf - should be opened.
"The place to start the free market is in our own country," said one executive. [The drilling ban] sets the stage for OPEC to do what we are doing in our own country, and that is effectively limiting supplies."
John Lowe, executive vice president of ConocoPhillips, said Congress should enact a balanced energy policy. In addition to lifting the drilling ban, such a policy could include measures to encourage alternative energy sources, remove the ethanol tariff, promote energy conservation, cut regulations around refining.
"We must work together to find a real solution," said Lowe. "U.S. oil companies should be viewed not as scapegoats, but as assets."
The executives also named several things that Congress should not do, first among them being a hike in taxes or an undoing of the mergers of the late 1990s.
"Americans need companies that can effectively compete for access to new resources," said Peter Robertson, vice chairman of Chevron. "Punitive measures that weakened us in the face of international competition are the wrong measures."
The executives also frowned on a recently passed House bill giving the Justice Department the power to sue OPEC, saying it would have little effect in boosting production.
The testimony was colored by a few outbursts of protest from members of the public. Before the hearing even began, a heckler in the crowd shouted: "Stop ripping off the American public - bring these oil prices down."
The panel took issue with the amount of money oil firms are investing in finding oil, and investing in renewables.
"You know how much cash you have on hand compared to capital investment," said Durbin. "They are begging us for more refineries, for more exploration, when their refineries are only operating at 85 percent."
Chevron's Robertson said the issue wasn't really one of refining, and more just the price of crude.
We are investing all we can [in finding new oil] given the limitations of access and our own human capacity," he said. "We have adequate refined capacity, inventories are at an all time high. The issue is the price of crude."
Committee Chairman Sen. Patrick Leahy, D-Vt., likely summed up the feeling of many senators on the panel.
"The people we represent are hurting, while your companies are profiting," he said. "We need to get some balance."
http://money.cnn.com/2008/05/21/news/economy/oil_hearing/index.htm?cnn=yes
