Big Oil Bosses Prepare To Face Congress About Record Profits
Big Oil bosses prepare to face Congress
Energy executives to be grilled over record profits, high prices
http://www.msnbc.msn.com/id/9970294/
Updated: 4:35 p.m. ET Nov. 8, 2005
NEW YORK - The all-star cast of energy executives due to face Congress Wednesday has an unenviable task: convincing lawmakers that record profits in the face of sky-high gasoline prices do not warrant penalties.
At issue is whether Congress will levy a tax on record oil industry profits, be it a windfall tax on sales of oil over a certain price or a tax to fund a winter heating program for low-income families.
Most of the fireworks at the hearing are expected to be set off by lawmakers, feeling heat from constituents over gasoline prices and heating bills.
Corporate head honchos, however, are expected to be noncombative.
The oil companies have steadfastly maintained that record profits are nothing to be ashamed of, but brash statements in self-defense may backfire, said one government policy analyst.
“The problem is there is no way for oil companies to look good in this environment,” said Kevin Book, an analyst with Friedman, Billings, Ramsey & Co. Book said criticisms heard on the news are going be repeated through questions like: “’How do you deal with old grandmothers being pulled from their homes because they can’t afford to heat them?”’
The chief executives lining up to face the joint hearing of the Senate energy and commerce committees include Exxon Mobil Corp.’s Lee Raymond, ConocoPhillips’s Jim Mulva, Chevron Corp.’s David O’Reilly, BP America Inc.’s Ross Pillari, and Shell Oil Co.’s President John Hofmeister.
Price of windfall profits
Exxon’s Raymond recently took critics to task by pointing to the failed windfall tax slapped on oil in the 1970s and said that no one called on Exxon to offer help when oil prices sank to $10 a barrel in the late 1990s. Exxon reported a $9.92 billion quarterly profit — its biggest ever — late last month.
Still, one marketing industry expert said the executives will have to take it on the chin this time.
“The oil companies will do the best that they can to explain the complexity of bringing oil to the market, explaining the variables of weather disasters and international conflicts and so forth,” said John Barker, president of DZP Marketing Communications. “But the bottom line is this is essentially the price they need to pay in a public forum for the windfall profits they’ve reported.”
The oil companies will probably emphasize a notion of a ”partnership” with the government and consumers that is essential to energy development in the United States, said Book. They are apt to argue that the subsidies the federal government offers oil companies may be unpopular, but are essential to domestic production when oil prices come down from their lofty levels, he said.
Their best hope may also be to try to convince the Senate and the public that they need this money now to prepare for a future where oil is less plentiful and more expensive to produce, and alternative energy sources have to take a more prominent place, said Barker.
“They need to stress the concept that they’re energy companies, not oil companies,” he said. “They need to own the future, and there is a plausible and somewhat defensible argument to be made that investing in the future is supported by higher prices at the pump.”
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