U.S. Oil Execs Come Out Swinging At House Hearing
WASHINGTON, April 1, 2008 (Dow Jones Newswires)
Top oil company executives on Tuesday pushed back against attacks on their industry, calling for the right to drill in off-limits areas and criticizing legislation in Congress to take away $18 billion in tax breaks from oil companies to subsidize renewable-energy investments.
Record prices at the pump have continued to put the oil industry on the defensive against consumer groups and top congressional Democrats critical of Big Oil's profits, despite the fact high energy prices are helping to encourage clean-energy and alternative technology.
"Stable tax and regulatory policies are essential to encouraging needed investments," said J.S. Simon, senior vice president of ExxonMobil Corp., in prepared testimony before a House panel. "Imposing punitive taxes on American energy companies, which already pay record taxes, will discourage the sustained investments needed to continue safeguarding U.S. energy security."
Chevron Corp. Vice Chairman Peter Robertson said the oil industry has been "urging greater access to U.S. resources - onshore and offshore." But he said that "instead, we have been increasing our demand on exporting countries," and warned that "any serious measures toward energy security must seek to reverse this equation."
The chairman of the House Select Committee on Energy Independence and Global Warming called the hearing amid voter frustration over record-high gasoline prices. Democrats have been on the offensive against oil companies all year, criticizing the companies' record profits as drivers pay more at the pump and renewable-energy legislation languishes amid opposition from Republicans allied with the oil industry.
Despite gasoline inventories at their highest levels in 15 years, the AAA Daily Fuel Gauge Report said Monday the national average retail price of regular gasoline stood at a record $3.287 a gallon. The price is 61.4 cents, or 23%, higher than a year ago.
"What is the oil industry doing with all this profit?" said Rep. Ed Markey, D-Mass., chairman of the committee. "Unfortunately, it goes as much to financial engineering as renewable engineering."
Oil companies say they are investing in renewable energy. Robert Malone, chairman of BP PLC's BP America Inc., said the company is building 700 megawatts of wind power this year and last year blended 763 million gallons of ethanol with gasoline. But he warned that both renewable energy and traditional fossil fuels will be necessary to meet demand.
"BP strongly supports the renewal of incentives for wind, solar, and biofuels," Malone said in prepared testimony. "They are an important part of why the U.S. has been so successful in developing its renewable energy sector, but we cannot support a tax package that discourages efforts to bring on other much needed energy sources."
Exxon's Simon said raising taxes on oil and gas production to subsidize alternatives "will likely lead to less overall energy production, not more."
The oil industry also says it's not reaping greater profits than other industries. American Petroleum Institute chief economist John Felmy this week pointed to fourth-quarter 2007 profit - net income divided by revenue - for the Dow Jones Industrial companies, which averaged 7.1 cents on the dollar compared with 7.4 cents on the dollar for the oil and gas industry.
API also said gasoline price highs were because of crude price increases, and those were a reflection of restricted access both domestically and abroad. Nearly 70% of gasoline prices reflected the cost of crude, and adding state taxes, margins have been lower for many refineries than historical levels.
WASHINGTON, April 1, 2008 (Dow Jones Newswires)
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