Oil industry executives yesterday blamed a supply shortage for the nation’s high gasoline prices while skeptical members of Congress demanded to know why their profits have reached record levels.
“We have reached a point where worldwide demand is straining the global energy system,” said Peter J. Robertson, vice chairman of Chevron Corp., in testimony before the Senate Judiciary Committee.
Senate Democrats recently proposed an energy bill that would tax the “windfall” profits of the nation’s five largest oil companies.
Executives from the companies said such taxes would do nothing to reduce gasoline prices. They said they need strong earnings to continue exploring for oil as the world’s supplies diminish.
“The oil and gas resources that are available for development are increasingly found in extremely difficult or hostile areas - areas that are more technically challenging … and are more costly to develop than has been the case during the past 30 years,” said John Hofmeister, president of Shell Oil Co.
The oil industry executives said they were being made scapegoats for high gasoline prices.
Sen. Patrick J. Leahy, Vermont Democrat, said oil prices that surpassed $133 a barrel yesterday could not be explained away by normal supply and demand.
“The issue is simple,” Mr. Leahy said. “People we represent are hurting; the companies you represent are profiting.”
J. Stephen Simon, executive vice president of Exxon Mobil Corp., said profits have been huge “in absolute terms” but must be viewed in the context of the massive scale of the industry.” He also said high earnings are needed “in the current up cycle” to pay for investments in the long term, when profits will be down.
” ’Current up cycle,’ that’s a nice term,” replied Mr. Leahy, “when people can’t afford to go to work” because gasoline is costing close to $4 a gallon.
He asked Mr. Simon what his total compensation was at Exxon Mobil, a company that made $40 billion last year. Mr. Simon replied it was $12.5 million annually.
John Lowe, executive vice president of ConocoPhillips Co., said he didn’t recall his total compensation. Mr. Hofmeister, the Shell president, said his was “about $2.2 million” but was not among the top five salaries at his company’s international parent. Robert Malone, chairman of BP America Inc., said his compensation was “in excess of $2 million.”
Sen. Arlen Specter, Pennsylvania Republican, said Exxon Mobil’s annual profits increased from $11.5 billion to $40.6 billion in the past five years and there was no explanation for “why profits have gone up so high when the consumer is suffering so much.”
The five companies together earned $36 billion in the first quarter of this year.
You have “just a litany of complaints that you’re all just hapless victims of a system,” Sen. Dianne Feinstein, California Democrat, told the executives. “Yet you rack up record profits … quarter after quarter after quarter.”
“I’m sorry to sound like a victim. I don’t feel like a victim at all,” replied Mr. Robertson of Chevron, saying he was proud of his company’s investments in future supply.
c This article was based in part on wire service reports.
Please read our comment policy before commenting.