- The Washington Times - Wednesday, November 9, 2005

Top oil company executives told Congress yesterday they are putting all their profits into securing more and cleaner fuel for U.S. and world consumers.

Responding to calls by lawmakers for an accounting of how the industry is using an estimated $100 billion in profits this year, the chief executives of Exxon Mobil Corp., Shell Oil Co., ConocoPhillips, Chevron Corp. and BP America said the money is invested over time in expanding production, and Congress should do nothing to discourage that.

Proposals have proliferated in recent weeks to tax oil profits or require the companies to contribute some of their gains to help poor people hurt by high heating bills and burdensome gasoline prices. The companies unanimously rejected those measures as counterproductive.

While the cost of fuel has soared, the cost of finding and delivering fuel has increased just as sharply and will remain expensive as companies replace dwindling U.S. oil reserves with exotic sources like the Canadian oil sands in the future, they said.

Nearly $17 trillion in investments will be needed in the next 50 years to ensure Americans and other consumers around the world have enough oil and gas to keep driving their cars and heating their homes, according to the International Energy Agency.

All of that money will come from oil company profits and the treasuries of nations with state-run oil companies like Saudi Arabia and Venezuela. The agency said this week there is a danger that not enough money will be spent, which would result in even higher oil prices.

The oil companies said they are doing their part.

“Over the past five years, Shell companies have invested approximately 100 percent of after-tax earnings in U.S. projects to meet the needs of consumers,” said Shell President John Hofmeister.

Shell has been a leader in extracting oil from difficult-to-reach places like the deep-water Gulf of Mexico and Athabasca oil sands in northern Canada, now that most cheap and easy sources of oil have been tapped, he said.

But costs have risen exponentially because of shortages of workers and equipment in the wake of two enormously damaging hurricanes this year, the executives told a joint hearing of the Senate’s energy and commerce committees.

The cost of floating oil rigs to replace dozens lost in the Gulf of Mexico because of Hurricanes Katrina and Rita, for example, has doubled from a year ago, while a critical natural gas pipeline in the Gulf of Mexico was “seriously damaged” by oil rigs set adrift by the storms, Mr. Hofmeister said.

The unprecedented destruction and interruption, at one point, of nearly 30 percent of U.S. energy production concentrated in the Gulf Coast region accounts for the dramatic increase in energy prices seen since this past summer, said Deborah Platt Majoras, chairman of the Federal Trade Commission (FTC).

The agency, which is charged with investigating complaints of price gouging by oil companies, expects “some adverse effect on energy prices to persist until the infrastructure recovers fully — a process that could take months,” she said.

“FTC studies indicate that higher retail prices for gasoline are generally not caused by excess oil company profits,” she said.

Exxon Mobil, which reported a record $9.9 billion in profit last quarter, will invest $18 billion this year, up from $15 billion in recent years, said Chairman and Chief Executive Officer Lee R. Raymond.

The oil giant cumulatively has spent more on expanding production in the past 10 years than it has earned in profits, he said.

“The petroleum industry’s earnings are at historic highs today,” he said, but are about average for U.S. businesses, when the industry’s $2.5 trillion of yearly sales are taken into account. “Our numbers are huge because the scale of our industry is huge.”

Exxon Mobil, the world’s largest private oil company, controls only 3 percent of global supplies, he said. As a result, it has little control over crude oil prices that are set in global markets or even the prices charged at the 93 percent of Exxon Mobil stations that are not owned by the company, he said.

“The big actors are Russia, the Middle East and OPEC,” he said. “Saudi Arabia tells us what the crude prices will be.”

Most of Exxon Mobil’s recent investments have been in foreign countries that have large remaining oil reserves and are more open to development than the United States, he said.

“We would like to invest even more in this country,” he said. “But the fact is … limited opportunities for new investment have been made available to us.”

With profits so high, the oil executives said they do not need tax incentives like the ones included in Congress’ energy legislation this summer, but need greater access to U.S. oil and gas reserves in Alaskan wilderness areas and the outer continental shelf if they are to reinvest their earnings profitably.

They also said more refinery capacity would be built in the U.S. if Congress concentrated on streamlining the cumbersome regulatory and approval processes, instead of providing tax incentives.

“We’re not asking for incentives,” said David O’Reilly, chairman of Chevron.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide