Senators Question Oil Industry Executives

WASHINGTON (By Justin Blum, Washington Post) November 9, 2005 — For the nation's top oilmen, it is a new and uncomfortable reality. They were summoned by the Republican leadership of the Senate and appeared this morning before two congressional panels to explain why prices climbed as high as they did and what they intend to do with their companies' soaring profits. The executives hope to persuade legislators not to take tough punitive action.

The hearing is an indication that big oil companies, which have received billions of dollars in tax breaks from Congress, are facing an increasingly hostile audience in Washington. Even some Republican lawmakers, whose party has long been sympathetic to the requests of the industry, are considering a windfall-profit tax for oil companies. Concerns mounted after oil companies recently reported record quarterly profits, including Exxon Mobil's $9.92 billion, up 75 percent from the third quarter last year.

Sen. Pete V. Domenici (R-N.M.) told the executives this morning, "The oil companies owe the country an explanation."

"I would hope that it's simply theater to demonstrate their concern about things that a lot of Americans are concerned about and that after the cameras go away, they get back to business," Jerry Taylor, director of natural resource studies for the Cato Institute, said earlier. Cato opposes new taxes on the oil companies. "On the other hand, it may well be an attempt to set the stage for real legislation," Taylor added.

At today's joint hearing of the Senate Energy and Natural Resources Committee and the Commerce, Science and Transportation Committee, being held at the request of Majority Leader Bill Frist (R-Tenn.), Republicans intend to show that they can be tough with oil companies.

Democrats tried to show they could be tougher. They demanded that the executives from Exxon Mobil Corp., Chevron Corp., ConocoPhillips Co., Shell Oil Co. and BP America Inc. be sworn in. That occurred when Congress held a hearing with oil executives in 1974 to explore energy shortages and high prices, resulting in front-page images of the officials with their right hands in the air. But Republicans refused to support that effort and the testimony went forward without taking any oaths.

Oil company executives hope that their explanations of how hurricanes Katrina and Rita knocked out a large amount of oil and gasoline production, creating tight supplies and resulting in commodities markets to send prices higher, will convince senators there was no price gouging and no manipulation. They will say the market worked because higher prices drove down demand, attracted imports of gasoline and prevented widespread shortages.

At least one of the executives will say he is sympathetic to consumers' concerns. "The increases in energy prices following hurricanes Katrina and Rita have put a strain on Americans' household budgets," according to a statement submitted to the Senate by Lee R. Raymond, chief executive of Exxon Mobil, the world's largest publicly traded oil company. "We recognize that. After all, our customers are your constituents. And we recognize our responsibility to make energy available to them at competitive costs."

In recent weeks, oil industry lobbyists have been working the halls of Congress, trying to kill any new taxes, make the case for expanded drilling in the United States and relax environmental rules affecting refinery construction. At the hearing, oil company executives will have a chance to put public faces on some of those arguments. For example, David J. O'Reilly, chief executive of Chevron, submitted testimony that calls for opening Alaska's Arctic National Wildlife Refuge to drilling, along with the continental shelves.

"For too long, Americans have been led to believe they can enjoy low oil and gasoline prices with less exploration and refining," O'Reilly said in his statement. "The hurricanes have shown that this equation is not sustainable."

The executives appeared before the members of the two committees in a meeting room with wood paneling and a big Senate seal. The chairman and ranking Democrat on each committee -- Sens. Ted Stevens (R-Alaska), Daniel K. Inouye (D-Hawaii), Jeff Bingaman (D-N.M.) and Domenici -- will give opening statements, and all of the committee members will be allowed to ask questions.

Later in the day, the committees will hear from the chairman of the Federal Trade Commission and several states' attorneys general.

Staff writer Jeffrey H. Birnbaum and researcher Richard Drezen contributed to this report.