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Oil companies under pressure after posting record profits

DPA, WASHINGTON
Sunday, Nov 06, 2005, Page 12

"You have a responsibility to help less fortunate Americans cope with the high cost of heating fuels. It's not unreasonable to expect corporations with 50, 75 or 100 percent growth in earnings this quarter to contribute a mere 10 percent of those profits to fuel-fund programs."

Senator Chuck Grassley, a Republican and chairman of the US Senate Finance Committee

Farning billions of dollars in a single quarter does not sound like a bad thing, but the soaring profits of oil companies, coupled with record gasoline prices, are leading to greater oversight from the US Congress.

Even members of US President George W. Bush's pro-business Republican Party, traditionally aligned with the oil industry, have voiced concern over the record profits that companies like Exxon Mobil and ConocoPhillips announced last week.

A Senate hearing on Wednesday will be investigating energy prices and corporate profits, and the chief executives of major oil and gas companies will appear to defend the earnings in light of record gasolines prices.

Exxon last week announced that its third-quarter profits were up 75 percent to nearly US$10 billion, resulting in an outcry among consumers and raised eyebrows in Washington.

Opposition Democrats have sought to capitalize on the situation by promoting a "windfall tax" on the profits.

They want to use the revenue from such a tax to send rebate checks to all Americans to help them pay for gasoline and heating oil as winter is fast approaching.

Some Republicans, including senator Judd Gregg, have also mentioned a windfall tax, but want to use the revenue to boost the Low Income Home Energy Assistance Program (LIHEAP), which helps poor and elderly Americans to pay their heating bills.

Senator Chuck Grassley, a Republican and chairman of the powerful Finance Committee, proposed this week that oil companies should voluntarily share their profits.

"You have a responsibility to help less fortunate Americans cope with the high cost of heating fuels," Grassley said in letters to the industry. "It's not unreasonable to expect corporations with 50, 75 or 100 percent growth in earnings this quarter to contribute a mere 10 percent of those profits to fuel-fund programs that supplement LIHEAP."

He also advocates that oil companies spend their profits on oil exploration, production and refining instead of hoarding cash.

But the Republican leadership has so far not indicated a willingness to budge on the issue.

"Oil and gas companies are enjoying record profits," House Speaker Dennis Hastert said. "That is fine. This is America."

But Hastert also suggested that the industry should invest in oil exploration, production and refining.

Democrats, hoping to capitalize on the public's frustration with record oil prices, used their weekly radio address to discuss the issue.

Representative John Dingell, a veteran Democrat, accused Republicans of passing further subsidies to the oil industry despite the record profits.

"That's right; millions of your hard-earned tax dollars would go to the same companies reaping the benefit of US$3 a gallon of gas and US$60 a barrel of oil," Dingell said in his address to the country.

But many Republicans and oil executives say the high profits are only showing that the marketplace is at work. Not so, stated Senator Byron Dorgan, a Democrat, citing the federal subsidies and the lack of competition in the industry.

"The price of oil is to the free market system like mud wrestling is to the performance arts," Dorgan said in the Senate last week.
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