Date registered: Jan 2005
Vehicle: 2006 ML350
Location: Chicago, IL
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Oil Company Executives Defend Profits
WASHINGTON - The chiefs of five major oil companies defended the industry's huge profits Wednesday at a Senate hearing where lawmakers said they should explain prices and assure people they're not being gouged.
There is a "growing suspicion that oil companies are taking unfair advantage," Sen. Pete Domenici (news, bio, voting record), R-N.M., said as the hearing opened in a packed Senate committee room.
"The oil companies owe the country an explanation," he said.
Lee Raymond, chairman of Exxon Mobil Corp., said he recognizes that high gasoline prices "have put a strain on Americans' household budgets" but he defended his companies huge profits, saying petroleum earnings "go up and down" from year to year.
ExxonMobil, the worlds' largest privately owned oil company, earned nearly $10 billion in the third quarter. Raymond was joined at the witness table by the chief executives of Chevron, ConocoPhillips, BPAmerica and Shell Oil USA.
Together the companies earned 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.
Raymond said the profits are in line with other industries when profits are compared to the industry's enormous revenues.
Democrats had wanted the executives to testify under oath, but Republicans rejected the idea. "If I were a witness I would demand to be put under oath," said Sen. Daniel Inouye (news, bio, voting record), D-Hawaii. The soaring prices have sent shivers through a Congress worried about political fallout.
A number of Democrats, joined by a few Republicans, have called for a windfall profits tax on oil companies.
Domenici said he opposed such a move saying "it didn't work before and probably won't work again." The government imposed taxes on oil company windfall profits in the 1970s, resulting in a drop in investment in oil development.
The executives hoped 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 argues.
James Mulla, chairman of ConocoPhillips, said "we are ready open our records" to dispute allegations of price gouging. ConocoPhillips earned $3.8 billion in the third quarter, an 89 percent increase over a year earlier. But he said that represents only a 7.7 percent profit margin for every dollar of sales. "We do not consider that a windfall," said Mulva.
David O'Reilly, chairman of Chevron, attributed the high energy prices to tight supplies even before the Gulf hurricanes hit and said his company is "investing aggressively in the development of new energy supplies."
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