Oil Execs to be questioned on profits..

[Steff]

http://news.yahoo.com/s/ap/20051109/ap_on_...WZuBHNlYwMxNjk0

 

Senators Expected to Grill Oil Execs

By H. JOSEF HEBERT, Associated Press Writer

Wed Nov 9, 5:06 AM ET

 

WASHINGTON - Huge oil company profits at a time when motorists paid $3-plus for gasoline have sent shivers through a Congress worried about the political fallout.

 

Now senators are venting some anger — and hoping to get some answers — as the top executives of five of the biggest and most profitable oil companies testify at a Senate hearing.

 

The executives hoped Wednesday to dampen any further momentum for calls for taxing windfall oil company profits, something still viewed as a longshot but also no longer out of the question. Such a tax could inhibit investment in refineries or oil exploration and production, the industry contends.

 

The oil industry's record third-quarter profits — at a time when motorists were reeling from unprecedentedly high gasoline costs and warned of huge heating bills this winter — has caught the attention of both Republicans and Democrats in Congress. Some analysts predict the 29 largest oil companies will earn $96 billion this year.

 

"Consumers need relief from high energy prices," Sen. Byron Dorgan (news, bio, voting record), D-N.D., said Tuesday, reiterating his call for a windfall profits tax on oil companies. "Talk is cheap. The price of energy is not. Congress needs to act."

 

By most accounts, the hearing Wednesday will have much rhetoric and likely result in little action.

 

Lawmakers, especially on the Republican side, "need some cover in the face of record-breaking profits," says Christine Tezak, an energy analyst for Stanford Washington Research Group. "Expect a lot of criticism ... but there is far more rhetoric than votes in support of windfall profits taxes."

 

The oil executives are expected to defend their profits and emphasize that the profit numbers are huge because the industry is huge.

 

Together the five companies — Exxon Mobil Corp., Chevron, ConocoPhillips, BPAmerica and Shell Oil USA — reported more than $25 billion in profits in the July-September quarter as the price of crude oil hit $70 a barrel and gasoline surged to record levels after the disruptions of Hurricanes Katrina and Rita.

 

"It's profits that make the companies run and make the economy run," ExxonMobil chairman Lee Raymond said Tuesday on CNBC, showing no sign of being defensive about his company's nearly $10 billion in earnings, on revenue of $100 billion, during the third quarter.

 

He called the industry cyclical by nature. "We have to have the peaks because we know we're going to have the valleys," he said, adding that ExxonMobil plans to invest $18 billion this year. As for a windfall tax, Raymond said it will mean "less earnings" and "our ability and willingness to invest is going to diminish."

 

The industry argues that the run-up of gasoline prices, which began earlier in the year, stems from high global crude oil costs and growing demand for gasoline this past summer, followed by a disruption of gasoline supplies when the hurricanes shut down more than a dozen refineries on the Gulf Coast.

 

Prices since have retreated from more than $3 a gallon to an average nationwide last week of $2.37, according to the Energy Department.

 

While the loudest calls for action against oil companies has come from Democrats, some Republicans have expressed similar frustrations.

 

"They are unhappy with the behavior of the oil companies," said GOP pollster David Winston, who advises GOP congressional leaders. "These are free market guys. They believe the market works. But in this case they are concerned that the consumer was clearly taken advantage of ... and they're pretty angry about it."

 

Senate Majority Leader Bill Frist, R-Tenn., who called the hearing to examine oil profits, said it may be time for a federal law against energy price gouging. And House Speaker Dennis Hastert, R-Ill., recently urged oil companies to invest more of their money into building more refineries, warning that if they don't Congress may take action.

 

Hastert said he plans to meet privately with a number of oil company executives this week to discuss, "eyeball-to-eyeball," the recent profit surge. An aide to Hastert said the speaker does not favor a windfall profits tax, but that momentum for it is growing.

 

Last week, Sen. Charles Grassley (news, bio, voting record), R-Iowa, urged the industry to donate some of its profits to help low-income families meet energy costs. Advocates for the poor estimate $5.1 billion will be needed to help low-income households pay for heating this winter. The government provided about $2 billion last year.

 

Grassley said he still opposes a windfall profits tax on the oil companies. Another Republican, Sen. Judd Gregg (news, bio, voting record) of New Hampshire, however, has joined a number of Democrats in calling for such a tax.

[Balta1701]

Here's the odd little part...the Democrats wanted to have those Execs testify under oath.

 

The Republicans refused.

 

It's almost as if the Republicans want them to be able to get away with not telling the whole truth. But that couldn't be it, could it?

[kapkomet]

Here's the odd little part...the Democrats wanted to have those Execs testify under oath.

 

The Republicans refused.

 

It's almost as if the Republicans want them to be able to get away with not telling the whole truth.  But that couldn't be it, could it?

What good would it have done? It wouldn't change anything that's going on there. All this is - is a big dog and pony show by Congress to APPEAR like they're concerned. They don't give a s***, and that's why it's not under oath, and it doesn't really matter. And those Dems that called for it are doing nothing but adding gas (expensive at that) to the fire to appear to the people like they're against the BIG OIL MEN. What BS.

[southsider2k5]

I am glad to see the Dem's coming out and basically endorsing socialism here. I wonder who else they will decide is making too much money and take it from them? Should it just be corporations that are too wealthy or should people like Bill Gates be taxed for being rich as well?

 

If they want to say the money was made illegally, that is one thing. Prosecute the company in the courts of law. But if all there is to say is that their profits are too big, I'll be waiting to see the Congress begin to drag in corporate CEOs from all industries in order to harass them about giving away their profits too. Personally I am waiting for the heads of companies such as GE, Intel, Microsoft, Coke, Time Warner, Citibank, Merck, Ebay, Google, JP Morgan, etc in front of Congress so they can explain their ill-gotten gains, and can be told who they should give them back to.

[southsider2k5]

Here's the odd little part...the Democrats wanted to have those Execs testify under oath.

 

The Republicans refused.

 

It's almost as if the Republicans want them to be able to get away with not telling the whole truth.  But that couldn't be it, could it?

 

LMAO. I thought lying to Congress under oath didn't matter anymore?

 

Anyways a formal swearing in process is pretty pointless.

 

Senate Commerce Chairman Ted Stevens rejected calls by some Democrats to have the executives sworn in, saying the law already required them to tell the truth.

 

They don't have to be sworn in to have to tell the truth. if they are testifying and lie, they can still get into trouble.

[Steff]

If they want to say the money was made illegally, that is one thing.  Prosecute the company in the courts of law.  But if all there is to say is that their profits are too big, I'll be waiting to see the Congress begin to drag in corporate CEOs from all industries in order to harass them about giving away their profits too.  Personally I am waiting for the heads of companies such as GE, Intel, Microsoft, Coke, Time Warner, Citibank, Merck, Ebay, Google, JP Morgan, etc (moving companies  ) in front of Congress so they can explain their ill-gotten gains, and can be told who they should give them back to.

 

 

Uhhh... no.

[hi8is]

What good would it have done?  It wouldn't change anything that's going on there.  All this is - is a big dog and pony show by Congress to APPEAR like they're concerned.  They don't give a s***, and that's why it's not under oath, and it doesn't really matter.  And those Dems that called for it are doing nothing but adding gas (expensive at that) to the fire to appear to the people like they're against the BIG OIL MEN.  What BS.

im guessing you republican

on non partisen

[kapkomet]

im guessing you republican

on non partisen

I tend to agree more with Republicans, but they are both ripe for the picking. They all suck right now.

[mreye]

I am glad to see the Dem's coming out and basically endorsing socialism here.  I wonder who else they will decide is making too much money and take it from them?  Should it just be corporations that are too wealthy or should people like Bill Gates be taxed for being rich as well?

 

If they want to say the money was made illegally, that is one thing.  Prosecute the company in the courts of law.  But if all there is to say is that their profits are too big, I'll be waiting to see the Congress begin to drag in corporate CEOs from all industries in order to harass them about giving away their profits too.  Personally I am waiting for the heads of companies such as GE, Intel, Microsoft, Coke, Time Warner, Citibank, Merck, Ebay, Google, JP Morgan, etc in front of Congress so they can explain their ill-gotten gains, and can be told who they should give them back to.

Right on! Right f***ing on!

 

[hi8is]

what they have been doing with gas prices is completely insane and cant really be compared with the likes of companys such as google and ebay.

 

a better analogy would be food.

imagine humans could only eat apples, a barrell of 1,000 apples costs 10 dollars to harvest and grow.... the apple company then in turn sells the barrell of 1,000 apples to a store for 150 dollars... the store then sells each apple for 3 dollars a peice.

 

and we have to eat in order to allow society to function, each person in the chain of command knows they have us by the balls.

 

they know they can charge whatever they want.

 

just 3 years ago the national average for gallon was OVER 50 PERCECNT LESS then it is now.

 

there hasnt been that big of a production drop off... (in fact, we were making less then)

 

somethings fishy and for you to say that its harboring a socalist society to try and get the the bottom if it.... i think is somewhat ingornat.

[kapkomet]

If you look at profit percentages as a percent of revenue, it's roughly the same as some of these other companies and industries that ss2k put down. Microsoft has us by the balls just as much as the gas companies do, albiet in a different way. Think about it.

[southsider2k5]

what they have been doing with gas prices is completely insane and cant really be compared with the likes of companys such as google and ebay.

 

a better analogy would be food.

imagine humans could only eat apples, a barrell of 1,000 apples costs 10 dollars to harvest and grow.... the apple company then in turn sells the barrell of 1,000 apples to a store for 150 dollars... the store then sells each apple for 3 dollars a peice.

 

and we have to eat in order to allow society to function, each person in the chain of command knows they have us by the balls.

 

they know they can charge whatever they want.

 

just 3 years ago the national average for gallon was OVER 50 PERCECNT LESS then it is now.

 

there hasnt been that big of a production drop off... (in fact, we were making less then)

 

somethings fishy and for you to say that its harboring a socalist society to try and get the the bottom if it.... i think is somewhat ingornat.

 

Fishy? What is fishy about high Chinese demand, terror fears, followed by supply shock? There is nothing fishy, its economics 101. Energies have a minmal elasticity. For a given price increase, there is a very small dropoff in usage. With a big demand only a couple of things can stop a big price increase from happening, and that is a big price increase to quell demand, or an increase in supply. And since we all know that there hasn't be a refinery build in the US since the 80's, supply isn't going to be the answer to the problems.

[NUKE_CLEVELAND]

Southsider is just owning everybody in this thread.

 

 

All bow before him!!!

 

 

[kapkomet]

I think there's juuuuuuuuuust a few more oil using products out there now compared to 15-20 years ago.

[Balta1701]

Fishy?  What is fishy about high Chinese demand, terror fears, followed by supply shock?  There is nothing fishy, its economics 101.  Energies have a minmal elasticity.  For a given price increase, there is a very small dropoff in usage.  With a big demand only a couple of things can stop a big price increase from happening, and that is a big price increase to quell demand, or an increase in supply.  And since we all know that there hasn't be a refinery build in the US since the 80's, supply isn't going to be the answer to the problems.

But see, the point that there hasn't been a refinery built in the U.S. in 20 years actually doesn't matter, because the oil companies don't want to build any more refineries. In fact, I can cite one example here in California where Shell tried to shut down a profitable refinery which produced 2% of this state's unleaded and 5% of its diesel fuel. The state chose not to let them shut it down and forced them to sell it instead. Flying J seems happy with their purchase - it is quite profitable for them.

 

There are several reasons why supply hasn't increased. First and foremost...oil companies know about the inelastic curve as much as you do, and they know that they turn higher profits at higher prices, so its to their benefits to not build any more refineries, because it starts to restrict supply.

 

Beyond that, there's the simple matter of there not being any more oil in the ground, but that's a post for another discussion, and I have a class in 30 seconds.

[southsider2k5]

But see, the point that there hasn't been a refinery built in the U.S. in 20 years actually doesn't matter, because the oil companies don't want to build any more refineries.  In fact, I can cite one example here in California where Shell tried to shut down a profitable refinery which produced 2% of this state's unleaded and 5% of its diesel fuel.  The state chose not to let them shut it down and forced them to sell it instead.  Flying J seems happy with their purchase - it is quite profitable for them.

 

There are several reasons why supply hasn't increased.  First and foremost...oil companies know about the inelastic curve as much as you do, and they know that they turn higher profits at higher prices, so its to their benefits to not build any more refineries, because it starts to restrict supply.

 

Beyond that, there's the simple matter of there not being any more oil in the ground, but that's a post for another discussion, and I have a class in 30 seconds.

 

 

You can also probably dig up many NIMBY problems for companies who have wanted to build more capacity. Everyone wants cheaper energy, but no one wants a crude oil refinary or a nuclear power plant in their neighborhood. Everytime one gets planned, its gets followed by years of lawsuits and court fights. All of those costs come before a dime is realized by the company, if ever.

 

Envoirnmental standards are another huge factor as to why the prices of energies are so high, especially during the summer. As some people know there aren't just 3 grades of gasoline that you can choose from. Many states and local governments have required special gasoline blends that burn cleaner than what is the fed governments requirements are. IIRC California alone can require up to 20 different distinct blends of just unleaded gasoline when the all of the different blends required by cities and counties are included. Realize that every additional step of refining, means additional costs are being added to the final product. And we still haven't gotten into the 36 cents per gallon federal taxes. The state, country and local sales and gas taxes, etc. I know in Indiana we are paying 50 cents per gallon in HWY taxes, plus sales taxes.

 

Another issue would be how long it takes to go from wanting to build a refinary to actually having one producing, and the fact that if you traced back that long, you would be right back into the times that it was unprofitable to have anymore capacity in the system. Remember the price of crude oil hadn't been over $30 brl from about the middle 80's (when Reagan was destroying capital products prices to bankrupt the Soviets) until about 2003. The historical low price of crude goes a long way towards explaining why no refinary's were built for a long time.

[KipWellsFan]

For the record, senators swore in the baseball players testifying at the steroids hearings, the tobacco execs testifying in the 90s, and Jack Abramoff when he recently testified.

http://www.dailykos.com/storyonly/2005/11/9/121726/573

 

[southsider2k5]

I'd be curious to see the last time that an orchard was built, or what poor people that Big Juice is planning on returning its profits to? This editorial ran in yesterday's Trib

 

There were the oil executives Wednesday, twisting on the spit as the scent of burnt hickory rose from Capitol Hill. More than a few Americans enjoyed watching the suits answer for gasoline pump prices that soared past $3 a gallon--and the companion shock of higher heating costs. Members of Congress are of a mind that somebody's going to get roasted for high energy prices, and it won't be them. So they hauled the oil execs to Washington.

 

This prime political theater, a Senate hearing, was convened to investigate why the nation's oil companies made more than $25 billion in profits between July and September when oil prices were surging to nearly $70 a barrel.

 

The price of the basic commodity soared because of rising demand and hurricane-produced supply disruptions. Profits rose, and that has prompted some lawmakers to accuse Big Oil of price gouging and to threaten to impose a tax on windfall profits.

 

It's never a good sign when government wants to decide how much profit is "too much" in a competitive market. There's reason to believe a windfall tax would hamper efforts to reduce America's dependence on foreign oil supplies. How so? We know from grim experience. After the 1970s oil shocks, the U.S. passed a windfall profits tax that ran from 1980 to 1987. It depressed domestic oil production by up to 6 percent and hiked imports by as much as 15 percent. Oops.

 

Backers of a new tax say they'd do it differently this time. Oil companies could avoid the tax if they plowed revenues into efforts to increase their supply and refining capacity. But that's suspect on two counts: It would create no profit incentive to increase supply and wouldn't reduce consumer demand for oil. Oops, the Sequel.

 

This is a cyclical industry. Oil company profits in 2002 were barely half what they were in 2001. A Business Week assessment found that the profitability of oil and gas firms from 1999 to 2003 was lower than the general profitability of all industries. Yet Congress is not talking about a windfall bank profit tax or a windfall software maker tax, to pick two industries that show healthier margins than the oil companies.

 

And consider: Florida just got hammered by Hurricane Wilma. Consequently, grapefruit may be scarce this winter. Orange juice prices are surging. That's not Big Juice profiteering. It is, though, the law of supply and demand. Sometimes we win, sometimes Big Juice wins. Same with Big Oil, which has its dry-hole years.

 

This page isn't averse to taxing energy. We have long supported a gasoline-tax increase to reduce consumer demand. Consumers respond to price signals in a free market. But a windfall tax would only gum up the market's engine.

 

If you're mad about oil and natural gas costs, turn down your thermostat and walk to the store. That'll show 'em.

[Texsox]

Let me see if y'all think these two things should be linked.

 

According to Bush suporters:

 

A.) The economy would have been much, much better if energy prices had remained lower.

 

B.) We shouldn't be interested in oil company profits.

 

Oil companies could cripple the US economy. If they are engaging in collusion to raise prices, shouldn't the government step in, investigate, and prosecute? Isn't that in our nation's best interest?

 

It seems like we should be very interested in this industry.

 

Of course as we discussed in other threads, we could just stop buying oil and oil related products like everything in our house from chemicals to plastics.

[southsider2k5]

Let me see if y'all think these two things should be linked.

 

According to Bush suporters:

 

A.) The economy would have been much, much better if energy prices had remained lower.

 

B.) We shouldn't be interested in oil company profits.

 

Oil companies could cripple the US economy. If they are engaging in collusion to raise prices, shouldn't the government step in, investigate, and prosecute? Isn't that in our nation's best interest?

 

It seems like we should be very interested in this industry.

 

Of course as we discussed in other threads, we could just stop buying oil and oil related products like everything in our house from chemicals to plastics.

 

Interested, yes. Socialism, no.

 

My biggest problem with this is that this really isn't even the Congress's realm of exsistance to be worrying about this stuff. If there has been a law broken, then the legal system should be investigating them.

 

Out of the testimony that has been made public, basically what I have heard is either Congress exploring wealth redistribution and collusion, neither of which needs be dealt with by that branch of the government.

 

They COULD be worrying about things that they are actually supposed to be taking care of, like balancing the budget, but instead they are giving millionaires all expense paid trips to Washington DC, so that Congressmen can jockey to get their soundbytes into the media, meanwhile accomplishing exactly nothing productive. Its a waste of tax dollars at best, at worst it is the legislative branch trying to quash capitalism and judiciate at the sametime.

[Texsox]

I agree there is an awful lot of political jockeying going on, on both sides. But I think congress has unique subpoena powers which are very helpful in this. Plus, congress looking at this is far more worrisome to a company that some assistant junior deputy in the justice department.

 

Cutting out the b.s. politics for a moment, do you think it is in the nation's best interest to keep close tabs on what the oil industry is doing?

[southsider2k5]

I agree there is an awful lot of political jockeying going on, on both sides. But I think congress has unique subpoena powers which are very helpful in this. Plus, congress looking at this is far more worrisome to a company that some assistant junior deputy in the justice department.

 

Cutting out the b.s. politics for a moment, do you think it is in the nation's best interest to keep close tabs on what the oil industry is doing?

 

I think it is in our best interests for the legal system to make sure that the profits were legally gotten. Beyond that, we live in a capitalistic society, if we take away the profit motivation of companies, why would anyone invest in this country?

[Texsox]

I think it is in our best interests for the legal system to make sure that the profits were legally gotten.  Beyond that, we live in a capitalistic society, if we take away the profit motivation of companies, why would anyone invest in this country?

 

We do not create laws to maximize company profits. We do not have a completely free market. Ma Bell was doing great when they were forced to break up into smaller companies. The tobacco industry was making great profits until they were forced to spend hundreds of millions on anti-smoking campaigns. Yet, there is still investment in those industries.

 

Once again Congress is availing themselves of constitutionally guaranteed powers. I would be hypocritical to state they should not do that. After all I believe as long as the judicial branch is following the same constitution, we are in good hands. What Congress does after this would bring out debate on the type of issues that you raise.

[mreye]

Who's the biggest profiter in all of this?

[southsider2k5]

We do not create laws to maximize company profits. We do not have a completely free market. Ma Bell was doing great when they were forced to break up into smaller companies. The tobacco industry was making great profits until they were forced to spend hundreds of millions on anti-smoking campaigns. Yet, there is still investment in those industries.

 

Once again Congress is availing themselves of constitutionally guaranteed powers. I would be hypocritical to state they should not do that. After all I believe as long as the judicial branch is following the same constitution, we are in good hands. What Congress does after this would bring out debate on the type of issues that you raise.

 

You are looking at 3 completely different situations.

 

Big Oil is not a monopoly. Big Oil is not making a dangerous product that they are lying to the American people about the safety risks about. It is nothing like Bell and Big Tobacco.

 

Also if you want to look at those industries, the long distance phone market has completely collapsed since it was Trust-busted. If you don't believe me, go look at the rates for long distance phonecalls, and the prices of the stocks that go with those companies. Many companies actually quit offering long distance service because there is no money to be made in that sector. Finally when it came to the Bell situation, guess who took action on it? It wasn't Congress either, it was the Justice Department who successfully prosecuted them under the monopoly laws.

 

It was basically the samething in the position of Big Tobacco. They were taken to court, not Congress, for their illegal activities. It was legal settlements and court judgements that forced them to reform their ways. Also when it comes to investment in that sector, it has pretty well collapsed. It is to the point where the US government (ie you and I) are paying tobacco farmers to grow something else, and companies like Phillip Morris (now Altria) instead of reinvesting in themselves are buying up other companies (such as the MO/K merger) to keep profitable, and focusing their efforts into other countries to sell their products.

 

Remember we also do not create laws to cap profits. We create laws to protect the public, the employees, and the consumers, but after that we allow companies to maximize their profits.

 

And finally we are looking at the branches of government overstepping their bounds all over the place. Congress is looking to judiciate. The courts are looking to legislate. The President and Congress are looking to control the media. (and people wonder why we have a bloated federal government) If we need debate over an issue, it isn't the Congresses job to do so, that is why we have the press around. It is their job to investigate and stir up public debate. Congresses job is to make laws, not determine legalities.