Big Oil Defends Profits

By
Wednesday, April 02, 2008 at 6:49 am

In the face of record fuel prices for consumers and record profits for oil companies, congressional Democrats admonished oil industry leaders Tuesday for doing far too little to ease prices at the pump. At a time of rising global warming concerns, the lawmakers also charged, the companies should dedicate far more of those revenues to developing sustainable fuels.


Rep. Edward J. Markey (D-Mass.), chairman of the House Select Committee on Energy Independence and Global Warming, called directly on the companies to lower their prices to consumers. He also asked that they support a House bill that would eliminate billions of dollars in oil subsidies and promote the production of renewable energies instead.


Illustration by: Matt Mahurin

Illustration by: Matt Mahurin

“The poorest Americans are now spending an average of 10 percent of their income to pay for gasoline,” Markey said in a statement. “We need the companies here today to make a similar commitment to American families and pledge to invest at least 10 percent of their profits in renewable energy and biofuels to develop alternatives that will help consumers.”


The hearing came exactly two months after Exxon Mobil announced $40.6 billion in net earnings last year — the single largest profit claimed in corporate history. Markey said the net revenues of the nation’s top five oil corporations — all represented at Tuesday’s hearing — totaled $123 billion in 2007. Despite those enormous figures, however, the industry has dedicated only a fraction to the search for alternative fuels.


The trends have raised eyebrows in Congress, not least of all because gas costs for consumers have skyrocketed simultaneously. Fueling the criticisms, the Energy Information Administration reported Monday that the average retail cost for a gallon of gas hit $3.29 per gallon — another historic high.


But oil industry representatives argued that the rising prices and profits are largely out of their control. Rather, they said, their companies are struggling to keep a foothold in a global marketplace made unpredictable by geopolitical turmoil abroad and evolving industry regulations at home. High profits in up-cycles, they said, are needed to fund development in down-cycles. Federal tampering in that market, they added, will only make matters worse.


“Government mandates and subsidies distort market forces and impede technological innovation,” J. Stephen Simon, senior vice president of Exxon Mobil, said during his testimony. “Raising taxes on oil and gas production to subsidize alternatives will likely lead to less overall energy production, not more.”


Joining Simon Tuesday were John D. Hofmeister, president of Shell Oil; Robert A. Malone, chair and president of BP America; Peter J. Robertson, vice chair of Chevron, and John E. Lowe, executive vice president of ConocoPhillips.


The industry’s sentiments were supported by a number of Republicans on the panel, who argued that Congress could help lower fuel prices by lending the industry access to new frontiers of exploration, like Alaska’s Arctic National Wildlife Refuge. As noble as the move to renewables might be, they said, it won’t happen overnight.


“Any reasonable energy policy must recognize that we need affordable supplies of energy,” said Rep. F. James Sensenbrenner (R-Wis.), ranking member of the committee, “and that oil and gas must continue to play a dominant supply role for the foreseeable future.”


Adding urgency to the debate is the sheer amount of energy the United States consumes. While the U.S. makes up just 5 percent of the world’s population, it consumes 25 percent of its oil — most of it imported.


In February, the House passed a bill to eliminate roughly $17 billion in oil and gas subsidies, moving instead to develop wind, solar and other renewable energies. Republicans blocked efforts to move the bill in the Senate.


All sides agree that the country needs to move away from a reliance on foreign petroleum reserves — and that oil companies must play a vital role in that process. What remains in bitter contention is how much of industry’s resources should go toward that effort.


In one telling exchange, Markey pointed out that, despite Exxon Mobil’s $41 billion in profits last year, the company has committed only $100 million toward developing renewable fuels over the next decade.


Simon responded that, “Putting more money into something does not necessarily mean more progress.” That prompted Rep. Jay R. Inslee (D-Wash.) to wonder whether “the oil fairy” would take up the task instead.


Whatever the companies decide, there will be plenty of opportunity to inform Congress, Markey vowed. “This is the first of many hearings you’re going to have this year,” he said.

Categories & Tags: Congress| Environment/Energy| Science|

Comments

26 Comments

iamfrank
Comment posted May 1, 2008 @ 12:06 pm

The real answer is:

We will see progress on issues like energy, health care, unemployment, social security to name a few problems facing this nation on a daily basic when this self-serving congress and senate does their jobs.

The dog and pony show is all that we will get for this government…. They cannot work together and they are not working for "You".

With record profits, this government should be damn sure they are collecting all of the taxes that are due to the government, instead of throwing our money at them….Constant cycle Stupidity

If our Government was in the business of Government; our country would be light years ahead of the world.


mclaren
Comment posted April 18, 2008 @ 3:14 pm

Avianca:

Apparently those cavities are refilled with sludge, water and a host of other by-products that are removed in the process.


mclaren
Comment posted April 18, 2008 @ 3:13 pm

Thank you Pepper2000, you have momentarily restored my hope for economic literacy in the U.S.

One point: Saying that drilling in ANWR won’t help the supply issues is like saying adding another drinking fountain in an office building won’t supply more water to thirsty people. It’s part of the puzzle. If you add all the untapped reserves we currently know about, foreign dependence could be, if not eliminated, hugely reduced. The new reserve under N. Dakota, Montana, and Co. is predicted at something larger than the largest in Saudi Arabia. We aren’t allowed to drill or build more refineries because congress has meddled in the business. OPEC controls the bulk of reserves, and it sets the price. Oil companies buy much of the oil on the open market — they pay the price you see on the business page of the newspaper, same as butchers pay for pork and beef. The government makes a lot more money per gallon than Mobil Exxon ever has. And the government doesn’t have to explore, find, drill, ship, refine or deliver the gas to your pump. They stick a .45 in our guts when we fill up, and we pay up.

As for fuel cells, it takes more energy to create the hydrogen, to capture the electricity on a platinum collector(it takes alot of energy to mine for and process platinum for industrial use, not mentioning the price) to manufacture the batteries, to store the hydrogen, etc. than to drill for oil. If it was such a great idea, Exxon/Mobil would already lead the planet in fuel cell production and hydrogen distribution.

As for down-markets for oil, from the mid-80s to 2000, the market was so down that nobody bothered to drill for it. Imagine gold was going for $1 per ounce. How many people would be breaking their backs to find it, and if they did, would it be worth their time?


avianca
Comment posted April 9, 2008 @ 5:51 am

Putting all the "profits, up-cycles,monopolies " aside, I have what I hope isn’t considered a dumb question.

With all the crude oil being sucked out of rhe earth all over the world, what is left behind?

I would think nothing, a void. What geological implications could this have. I really hope someone out there has thought of this and has an answer.


marlee60
Comment posted April 5, 2008 @ 2:03 pm

"High profits in up-cycles, they said, are needed to fund development in down-cycles."

I didn’t see the hearings but this sounds like the same excuses they gave the last time. When was there a down-cycle for oil industry??? Is the panel just playing softball with these oil-moneybags? Did anybody question further about the down cycles? If there ever was downcycle, this time in history should be it. But no – historical record profits rolling in.


kittycat
Comment posted April 3, 2008 @ 6:25 pm

Sorry, who controls the oil in the world is not relevant to prices in the US.

Real oil price went up but not by much.

Our shot up for two reasons:

Dollar is worth about 45 cent to $1 in comparison to 2001.

Oil companies have raised up the price they pay for crude and processing by about 30% because they have monopoly on distribution within the US and keep consolidating.

Our government officials profited in millions each year. Hence they will institute the usual "war profiteer" tax that could have alleviated some of the suffering of the poor by being used to finance health care.

Not all of these officials are elected, but many are. Keep that in mind.


hammer55
Comment posted April 2, 2008 @ 7:09 pm

there should not be a shortage of oil or gas in this country period, years ago when the government got involved they saved millions and millions of crude oil and capped off fields of unused oil that they have never reopened, if they were to do this we wouldnt be in such a crunch and prices in our country would and should go down if the oil companies were to allow the government to do that without a uproar. if everybody parked their cars for 2 days it save gas but the oil companies would drop the prices to.


pepper2000
Comment posted April 2, 2008 @ 5:24 pm

In the United States today, there are many myths floating around regarding energy supplies. This is a good article because most of those myths come out.

Myth: Renewable energy will solve the energy crisis.

Reality: Renewable energy will help but will not allow us to continue the kind of society we have now. Ed Markey made a reference to biofuels, but the only currently commercially produced biofuel in the US, corn ethanol, is an enormous boondogle that is responsible for higher food prices, environmental damage, soil degradation due to monoculture, and very little displacement of fossil fuel consumption due to the fact that biofuel production costs almost as much energy as is contained in the biofuels themselves.

Myth: We can solve the energy crisis by drilling ANWR.

Reality: The amount of oil available in ANWR and off protected coastlines is small. It would not reverse the decline in US production; it will merely slow the decline for a brief time. We have to ask ourselves how much environmental destruction we are willing to endure for a little more petroleum.

Myth: Taxes or tax breaks to the oil industry have an effect on production.

Reality: Throughout differing tax regimes over the years, no evidence has emerged that the level of taxation has an appreciable effect on oil production.

Myth: ExxonMobil sets the oil price.

Reality: There is no evidence to suggest a conspiracy on the part of the oil industry to fix prices. Even if there was such a conspiracy, it would not work due to the fact that private corporations only control about 15% of world oil production. The other 85% is under the control of state companies. Crude oil, like other commodities, is traded on open markets and the price is set there based on supply and demand.

I think this last point is the most important. People see problems such as rising energy costs and want to find the easy scapegoats, but in reality the high prices are the result of stagnant supply and rising demand. Prices will continue to increase has supply decreases. The sooner we can get past the scapegoating and look at the actual reasons for what happens, the sooner we can find useful solutions.


jimi
Comment posted April 2, 2008 @ 11:38 am

April Fool on the American People! Bwahahaha! Congress will continue to represent very well those who donate heavily to their re-election. To bad it won’t be their in district constituents who’ll benefit. Perhaps after admonishing Big Oil a strongly worded letter will also be sent. /snark off


hammer55
Comment posted April 2, 2008 @ 11:28 am

what a bunch of crap congress was handed by big oil , if exxon are trying to improve our enviroment and search for a different areas of energy for the usa why do they charge almost 20 cents more a gallon across the street from a gas station that charges 20 cents less , one word, greed period. why havent they taken some of their huge profits and invested it into building new refineries so the oil that is shipped to them can be refined, and why hasnt the oil fields in the usa one after another been uncapped and opened back up, one word again greed, bleeding the pockets of americians that cannot keep dishing out more and more for gas and other products driven up by high gas prices, they are killing all low income families and dont just care, why before and even after sadamn lit the oil fields in iraq on fire did oil not rise it makes you wonder.


taywray
Comment posted April 2, 2008 @ 10:23 am

James Sensenbrenner wins today’s dumb douchebag award. A round of sarcastic applause please everyone… Not only did he stupidly opine that "oil and gas must play the dominant supply role for the foreseeable future," he pettily denied Bart Stupak a chance to ask the oil czars some real questions at the end of the session. (see Spencer’s previous post – GOP Silences Stupak) Way to represent the people Jimmy!


ajm8127
Comment posted April 2, 2008 @ 7:44 am

So, wait. The oil companies clam their record profits are out of their control. What the hell kind of business model is that? The problem with the situation is this: The oil companies are in control right now, and they like it on top. Once fuel cells mature, you can use electricity made from the sun to create hydrogen to power the cell. Whats the by-product you ask? WATER. No wonder they don’t want to invest in renewable energy research, they will lose their power. Its really hard for a corporation to limit the sun shining on the Earth, although, I’m sure they’ll try.The fact is the oil companies have us by the balls, and we should be very, very pissed off.


ajm8127
Comment posted April 2, 2008 @ 2:44 am

So, wait. The oil companies clam their record profits are out of their control. What the hell kind of business model is that? The problem with the situation is this: The oil companies are in control right now, and they like it on top. Once fuel cells mature, you can use electricity made from the sun to create hydrogen to power the cell. Whats the by-product you ask? WATER. No wonder they don't want to invest in renewable energy research, they will lose their power. Its really hard for a corporation to limit the sun shining on the Earth, although, I'm sure they'll try.The fact is the oil companies have us by the balls, and we should be very, very pissed off.


taywray
Comment posted April 2, 2008 @ 5:23 am

James Sensenbrenner wins today's dumb douchebag award. A round of sarcastic applause please everyone… Not only did he stupidly opine that "oil and gas must play the dominant supply role for the foreseeable future," he pettily denied Bart Stupak a chance to ask the oil czars some real questions at the end of the session. (see Spencer's previous post – GOP Silences Stupak) Way to represent the people Jimmy!


hammer55
Comment posted April 2, 2008 @ 6:28 am

what a bunch of crap congress was handed by big oil , if exxon are trying to improve our enviroment and search for a different areas of energy for the usa why do they charge almost 20 cents more a gallon across the street from a gas station that charges 20 cents less , one word, greed period. why havent they taken some of their huge profits and invested it into building new refineries so the oil that is shipped to them can be refined, and why hasnt the oil fields in the usa one after another been uncapped and opened back up, one word again greed, bleeding the pockets of americians that cannot keep dishing out more and more for gas and other products driven up by high gas prices, they are killing all low income families and dont just care, why before and even after sadamn lit the oil fields in iraq on fire did oil not rise it makes you wonder.


jimi
Comment posted April 2, 2008 @ 6:38 am

April Fool on the American People! Bwahahaha! Congress will continue to represent very well those who donate heavily to their re-election. To bad it won't be their in district constituents who'll benefit. Perhaps after admonishing Big Oil a strongly worded letter will also be sent. /snark off


pepper2000
Comment posted April 2, 2008 @ 12:24 pm

In the United States today, there are many myths floating around regarding energy supplies. This is a good article because most of those myths come out.

Myth: Renewable energy will solve the energy crisis.

Reality: Renewable energy will help but will not allow us to continue the kind of society we have now. Ed Markey made a reference to biofuels, but the only currently commercially produced biofuel in the US, corn ethanol, is an enormous boondogle that is responsible for higher food prices, environmental damage, soil degradation due to monoculture, and very little displacement of fossil fuel consumption due to the fact that biofuel production costs almost as much energy as is contained in the biofuels themselves.

Myth: We can solve the energy crisis by drilling ANWR.

Reality: The amount of oil available in ANWR and off protected coastlines is small. It would not reverse the decline in US production; it will merely slow the decline for a brief time. We have to ask ourselves how much environmental destruction we are willing to endure for a little more petroleum.

Myth: Taxes or tax breaks to the oil industry have an effect on production.

Reality: Throughout differing tax regimes over the years, no evidence has emerged that the level of taxation has an appreciable effect on oil production.

Myth: ExxonMobil sets the oil price.

Reality: There is no evidence to suggest a conspiracy on the part of the oil industry to fix prices. Even if there was such a conspiracy, it would not work due to the fact that private corporations only control about 15% of world oil production. The other 85% is under the control of state companies. Crude oil, like other commodities, is traded on open markets and the price is set there based on supply and demand.

I think this last point is the most important. People see problems such as rising energy costs and want to find the easy scapegoats, but in reality the high prices are the result of stagnant supply and rising demand. Prices will continue to increase has supply decreases. The sooner we can get past the scapegoating and look at the actual reasons for what happens, the sooner we can find useful solutions.


hammer55
Comment posted April 2, 2008 @ 2:09 pm

there should not be a shortage of oil or gas in this country period, years ago when the government got involved they saved millions and millions of crude oil and capped off fields of unused oil that they have never reopened, if they were to do this we wouldnt be in such a crunch and prices in our country would and should go down if the oil companies were to allow the government to do that without a uproar. if everybody parked their cars for 2 days it save gas but the oil companies would drop the prices to.


kittycat
Comment posted April 3, 2008 @ 1:25 pm

Sorry, who controls the oil in the world is not relevant to prices in the US.

Real oil price went up but not by much.

Our shot up for two reasons:

Dollar is worth about 45 cent to $1 in comparison to 2001.

Oil companies have raised up the price they pay for crude and processing by about 30% because they have monopoly on distribution within the US and keep consolidating.

Our government officials profited in millions each year. Hence they will institute the usual "war profiteer" tax that could have alleviated some of the suffering of the poor by being used to finance health care.

Not all of these officials are elected, but many are. Keep that in mind.


marlee60
Comment posted April 5, 2008 @ 9:03 am

"High profits in up-cycles, they said, are needed to fund development in down-cycles."

I didn't see the hearings but this sounds like the same excuses they gave the last time. When was there a down-cycle for oil industry??? Is the panel just playing softball with these oil-moneybags? Did anybody question further about the down cycles? If there ever was downcycle, this time in history should be it. But no – historical record profits rolling in.


avianca
Comment posted April 9, 2008 @ 12:51 am

Putting all the "profits, up-cycles,monopolies " aside, I have what I hope isn't considered a dumb question.

With all the crude oil being sucked out of rhe earth all over the world, what is left behind?

I would think nothing, a void. What geological implications could this have. I really hope someone out there has thought of this and has an answer.


mclaren
Comment posted April 18, 2008 @ 10:13 am

Thank you Pepper2000, you have momentarily restored my hope for economic literacy in the U.S.

One point: Saying that drilling in ANWR won't help the supply issues is like saying adding another drinking fountain in an office building won't supply more water to thirsty people. It's part of the puzzle. If you add all the untapped reserves we currently know about, foreign dependence could be, if not eliminated, hugely reduced. The new reserve under N. Dakota, Montana, and Co. is predicted at something larger than the largest in Saudi Arabia. We aren't allowed to drill or build more refineries because congress has meddled in the business. OPEC controls the bulk of reserves, and it sets the price. Oil companies buy much of the oil on the open market — they pay the price you see on the business page of the newspaper, same as butchers pay for pork and beef. The government makes a lot more money per gallon than Mobil Exxon ever has. And the government doesn't have to explore, find, drill, ship, refine or deliver the gas to your pump. They stick a .45 in our guts when we fill up, and we pay up.

As for fuel cells, it takes more energy to create the hydrogen, to capture the electricity on a platinum collector(it takes alot of energy to mine for and process platinum for industrial use, not mentioning the price) to manufacture the batteries, to store the hydrogen, etc. than to drill for oil. If it was such a great idea, Exxon/Mobil would already lead the planet in fuel cell production and hydrogen distribution.

As for down-markets for oil, from the mid-80s to 2000, the market was so down that nobody bothered to drill for it. Imagine gold was going for $1 per ounce. How many people would be breaking their backs to find it, and if they did, would it be worth their time?


mclaren
Comment posted April 18, 2008 @ 10:14 am

Avianca:

Apparently those cavities are refilled with sludge, water and a host of other by-products that are removed in the process.


iamfrank
Comment posted May 1, 2008 @ 7:06 am

The real answer is:

We will see progress on issues like energy, health care, unemployment, social security to name a few problems facing this nation on a daily basic when this self-serving congress and senate does their jobs.

The dog and pony show is all that we will get for this government…. They cannot work together and they are not working for "You".

With record profits, this government should be damn sure they are collecting all of the taxes that are due to the government, instead of throwing our money at them….Constant cycle Stupidity

If our Government was in the business of Government; our country would be light years ahead of the world.


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