"Big Oil Says Nothing Personal, It's Just Business"

On a day oil prices leaped to unheard-of highs, senators lined up Big Oil's biggest executives and pummeled them with complaints that they're pretending to be "hapless victims" while raking in record profits.

"Where is the corporate conscience?" Sen. Dick Durbin, D-Ill., asked the top executives of the five largest U.S. oil companies.

It's all about economics, came the reply. Supply and demand. The company leaders tried to shift attention from motorists' anger over $4-a-gallon gasoline to a debate over new areas for drilling.

But senators at the Judiciary Committee hearing weren't having any of that. They wanted to press the executives about public anguish over paying $60 or more to fill up a car's gas tank.

"People we represent are hurting, the companies you represent are profiting," Sen. Patrick Leahy, D-Vt., told the executives. He said there's a "disconnect" between legitimate supply issues and the oil and gasoline prices motorists are seeing.

The executives, sitting shoulder to shoulder in the hearing room, said they understood people were hurting, but they tried to blunt the emotion with economic analysis.

Profits have been huge "in absolute terms," conceded J. Stephen Simon, executive vice president of Exxon Mobil Corp., but they "must be viewed in the context of the massive scale of our industry." And high earnings "in the current up cycle" are needed for investments in the long term, including when profits will be down.

"'Current up cycle,' that's a nice term when people can't afford to go to work" because gasoline is costing so much, replied Leahy with sarcasm.

"The fundamental laws of supply and demand are at work," said John Hofmeister, chairman of Shell Oil Co., acknowledging it is something the oil industry has been saying for some time and that the explanation may sound "repetitive and uninteresting."

The executives, appearing under oath, cited tight global supplies with scant spare production capacity and the fact that large areas of land and offshore waters remain offlimits to drilling. And they said they're worried Congress was talking of requiring the five companies to pay more taxes.

"I urge you to resist these punitive policies," said Hofmeister

It was the second time this year the executives had been summoned to testify before Congress. When they came in early April oil cost about $98 a barrel.

This time the exchanges got personal.

Simon was asked what his total compensation was at Exxon, a company that made $40.6 billion last year. Simon replied it was $12.5 million.

John Lowe, executive vice president of ConocoPhillips Co., said he didn't recall his total compensations. So did Peter Robertson, vice chairman of Chevron Corp. Hofmeister said his was "about $2.2 million" but was not among the top five salaries at his company's international parent. Robert Malone, chairman of BP America Inc., put his "in excess of $2 million."

Sen. Arlen Specter, R-Pa., noting that Exxon's profits had nearly quadrupled from $11.5 billion in 2002, said he had heard nothing from the oilmen that would explain "why profits have gone up so high when the consumer is suffering so much."

 

President Bush walks with Saudi King Abdullah after a signing ceremony at the Al Janadriyah Ranch in Riyadh, Saudi Arabia, Friday, May 16, 2008. When Bush asked for more oil from Saudi Arabia he may have forgotten the Saudis have a long memory. And that almost assured his mission the past week was doomed to fail.

Sat May 17, 3:37 PM ET

(AP Photo/Susan Walsh)

When President Bush, once a Texas oilman, asked Saudi Arabia to pump more crude, he may have forgotten that the Saudis have a long memory. And that made it a good bet his mission this past week would produce a dry hole

In the 1990s the OPEC cartel was eager to pump more oil in a grab for cash as prices — like today — were going up, passing what then was viewed as a healthy sum in the $20-plus range. But then the Asia economic crisis struck and oil prices plummeted to below $10 a barrel.

Saudi Arabia and other producers got burned.

"They remember that and they're not going have that happen again," says Robert Ebel, an international energy expert at the Center for Strategic and International Studies. "They understand the market just as well as we do."

This time Bush in his trip to Riyadh and his private meetings with Saudi King Abdullah walked away with a trickle of oil, but nowhere near a gusher.

So when Bush made his second personal appeal this year to King Abdullah in search of ways to ease the pain for American motorists from soaring gasoline costs, the Saudis told him there's plenty of oil already available. The additional 300,000 barrels — bringing Saudi Arabia production to 9.4 million barrels a day — was simply to meet customer needs in June, officials explained.

Saudi oil minister Ali al-Naimi scolded those "who are questioning our oil practices and policies." Saudi officials also have reminded U.S. officials that they're increasing their capacity to produce more oil, now about 11.8 million barrels a day, but of course that doesn't bring any more actual oil onto the market.

Bush may not have agreed, but despite his close personal relationship with King Abdullah, he wasn't going to get anything close to what he sought. For the Saudis this is pure business.

Bernard Picchi, senior energy analyst at Wall Street Access, an independent research firm, says the Saudis also have to "walk a fine line" between behaving as a good ally to the United States, their biggest customer, and alienating other OPEC members.

"They played nice with us two years ago and did increase production going into the jaws of the heating season, and overproduced," recalls Picchi. But in the spring demand dropped and oil prices fell.

"A lot of people within OPEC blamed (the Saudis) of succumbing to U.S. pressure," said Picchi.

      The big US oil companies and the Arab OPEC  have both justified the escalating price of gas and oil with words, "it's just business". Big Oil asserts it's huge profits are necessary to cover the costs of drilling and refining oil. The Saudis assert that every time they increase production, prices fall dramatically. Big Oil says in essence "please don't punitively tax our profits" and OPEC in essence says "screw you". In my opinion, instead of putting additional taxes on the US oil companies, the Federal and state governments need to allow the US oil companies to spend these billion dollar profits in building more refineries and drilling for oil, whether off shore or inland. (America in fact has many untapped oil reserves). Another immediate solution is for US automakers to stop producing the dozens of huge gas guzzling vehicles and/or US consumers stop buying these"gas guzzlers". Lowering the highway speed limits will bring down gas consumption. The bottom line is, Big Business must have big profits to cover big production costs. This business cycle can only be broken by less demand for the product Big Business is selling. Until alternative energy sources are developed, US drivers will simply have to conserve and use less gas and oil. We lessen our demand for gas and oil and the price of gas and oil goes down. Then we can tell Big Oil and OPEC, "nothing personal, it's just business!" (or say "screw you")

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