Expect Sparks, No
Flames, at U.S. Senate Oil Hearing
November 09, 2005 — By Chris Baltimore, Reuters
WASHINGTON — Wednesday's Senate
grilling of top U.S. oil industry executives is likely to be heavy on
political theater but light on energy policy initiatives, analysts said.
Both Democrats and Republicans are expected to lambaste five Big Oil
executives about their companies' $30 billion in collective profits last
quarter, even as Americans paid record-high prices for gasoline to fill
their tanks and natural gas to heat their homes.
Matt Simmons, chief executive of Houston-based investment firm Simmons &
Co. International, said the hearing by the Senate's energy and commerce
committees will be "the greatest gladiator event of 2005." About a third
of the country's 100 senators are expected to be present.
"The five poor guys that have to come testify are actually the
Christians. The Republican senators are the lions and the Democrats are
the carrion birds," Simmons said.
Republican leaders have denounced soaring oil profits, feeling pressure
from constituents and fearing an opening for Democrats to attack them
ahead of the 2006 mid-term elections.
"I think the oil executives will get grilled very hard," said Pete
Domenici, chairman of the Senate Energy Committee. "They better come
prepared, they better bring their charts, they better show us what
they're doing with this money."
Democrats clearly relish the chance to question oil companies.
"Oil companies need to tell us the truth. They need tell the American
people how 75 percent profit increases in 90 days is justifiable to
consumers at the pump and at home," said Washington Sen. Maria Cantwell,
who sits on both the energy and commerce committees.
Cantwell is among many Democrats pushing for a law banning oil price
profiteering during emergencies.
Other lawmakers -- both Republicans and Democrats -- are demanding a
windfall profit tax on oil companies or a voluntary donation scheme to
help fund a federal program that pays for poor families' winter heating
bills.
Anchoring the panel is Lee Raymond, the stalwart chief executive of
Exxon Mobil Corp.. The company banked its biggest-ever quarterly profit,
$9.9 billion, last quarter. Also testifying will be chief executives of
Chevron Corp. and ConocoPhillips, plus leaders of the U.S. units of BP
Plc. and Royal Dutch Shell Plc.
Exxon's Raymond will later meet privately with House Speaker Dennis
Hastert.
Two conservative Republicans who chair Senate committees -- Judd Gregg
of New Hampshire and Charles Grassley of Iowa -- have urged major oil
companies to share their bounty.
BOOM AND BUST
For its part, the industry says it's acting responsibly to balance the
boom-and-bust cycle of crude oil prices.
"We have to manage through the cycle and also manage our financial
structure through the cycle, and I hope we're going to be able to talk
about that tomorrow," Raymond told CNBC.
In 1988, around the time when crude oil bottomed at around $10 a barrel,
Exxon invested $15 billion in capacity projects, Raymond said. This
year, when U.S. crude futures hit a record $70.85 a barrel, the company
will invest about $18 billion.
Republicans, traditionally strong supporters of the U.S. oil industry,
handed some $14.5 billion worth of incentives to energy companies in
legislation this year. But politicians are growing more uneasy as
Americans brace for winter heating bills which are forecast to jump to
record highs.
Natural gas heating costs in the U.S. Midwest will soar by nearly 50
percent this winter, while heating oil in the Northeast will climb 25
percent, according to government data.
Oil executives should stand fast and refuse to be bullied, said Larry
Goldstein, head of the Petroleum Industry Research Foundation. "If you
show weakness in this kind of political environment where the political
system is out for blood, the mere taste of blood will increase their
appetite."
Source: Reuters
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