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Oil executives defend massive profits

The chiefs of five major oil companies defended the industry's huge profits on Wednesday at a US Senate hearing, where lawmakers said they should explain prices and assure people they're not being gouged.

There is a "growing suspicion that oil companies are taking unfair advantage," Senator Pete Domenici said as the hearing opened in a packed Senate committee room.

"The oil companies owe the country an explanation," he said.

Lee Raymond, chairman of Exxon Mobil Corp, said he recognizes that high gasoline prices "have put a strain on Americans' household budgets" but he defended his company's huge profits, saying petroleum earnings "go up and down" from year to year.

ExxonMobil, the worlds' largest publicly traded oil company, earned nearly US$10 billion in the third quarter. Raymond was joined at the witness table by the chief executives of Chevron, ConocoPhillips, BPAmerica and Shell Oil USA.

Together the companies earned more than US$25 billion in profits in the July-September quarter as the price of crude oil hit US$70 a barrel and gasoline surged to record levels after the disruptions of Hurricanes Katrina and Rita.

Raymond said the profits are in line with other industries when they are compared to the industry's enormous revenues.

Democrats had wanted the executives to testify under oath, but Republicans rejected the idea.

"If I were a witness I would demand to be put under oath," said Senator Daniel Inouye, a Democrat from Hawaii.

The soaring prices have sent shivers through a Congress worried about political fallout.

The White House said US President George W. Bush was concerned about energy prices.

"Energy prices have been too high and energy companies have realized significant increases in profits," spokesman Scott McClellan said.

"It's important that the private sector be good corporate citizens and invest in the energy infrastructure and support those who are in need," he said.

A number of Democrats, joined by a few Republicans, have called for a windfall profits tax on oil companies.

Domenici said he opposed such a move saying "it didn't work before and probably won't work again."

The government imposed taxes on oil company windfall profits in the 1970s, resulting in a drop in investment in oil development.

The executives hoped to dampen any further momentum for calls for taxing windfall oil company profits, something still viewed as a longshot but also no longer out of the question. Such a tax could inhibit investment in refineries or oil exploration and production, the industry argues.

James Mulla, chairman of ConocoPhillips, said "we are ready open our records" to dispute allegations of price gouging. ConocoPhillips earned US$3.8 billion in the third quarter, an 89 percent increase over a year earlier. But he said that represents only a 7.7 percent profit margin for every dollar of sales.

"We do not consider that a windfall," Mulva said.

David O'Reilly, chairman of Chevron, attributed the high energy prices to tight supplies even before the Gulf hurricanes hit and said his company is "investing aggressively in the development of new energy supplies."
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