Big Oil defends profits before irate senators
By H. JOSEF HEBERT
Associated Press
May 22, 2008
WASHINGTON (AP) -- On a day oil prices leaped to unheard-of highs, senators lined up Big Oil's biggest executives and pummeled them with complaints that they're pretending to be ''hapless victims'' while raking in record profits.
''Where is the corporate conscience?'' Sen. Dick Durbin, D-Ill., asked the top executives of the five largest U.S. oil companies.
It's all about economics, came the reply. Supply and demand. The company leaders tried to shift attention from motorists' anger over $4-a-gallon gasoline to a debate over new areas for drilling.
But senators at the Judiciary Committee hearing weren't having any of that. They wanted to press the executives about public anguish over paying $60 or more to fill up a car's gas tank.
''People we represent are hurting, the companies you represent are profiting,'' Sen. Patrick Leahy, D-Vt., told the executives. He said there's 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 John Hofmeister, chairman of Shell Oil Co., acknowledging it is something the oil industry has been saying for some time and that the explanation may sound ''repetitive and uninteresting.''
Hofmeister was joined by executives of Exxon Mobil Corp., Chevron Corp., BP America Inc. and ConocoPhilips Co. Together the five companies earned $36 billion during the first three months of this year.
As the executives sought to explain their profits and why prices are so high, the global oil markets were moving into new, uncharted highs, touching $133 a barrel for the first time. The national average price of a gallon of gasoline hit $3.80, with $4 showing up in more places. Crude prices increased even more in late electronic trading Wednesday hitting $134 for the first time.
It was the second time this year the executives had been summoned to testify before Congress. When they came in early April oil cost about $98 a barrel.
This time the exchanges got personal.
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.
John Lowe, executive vice president of ConocoPhillips Co., said he didn't recall his total compensations. So did Peter Robertson, vice chairman of Chevron Corp. Hofmeister 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., put his ''in excess of $2 million.''
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