Economy & Trade, Headlines, North America

CORRUPTION: “Big Oil” Gets Grilled on Capitol Hill

Emad Mekay

WASHINGTON, Nov 9 2005 (IPS) - Some of the world’s top oil executives denied accusations Wednesday that they were engaged in “price gouging” in the United States, and even called for more incentives for the industry.

Feeling the pinch on U.S. consumers – and understanding the importance of the issue for voters – Congress held a hearing Wednesday at which legislators questioned the chief executive officers of the country’s largest oil companies.

The move came amid rising public anger over high energy costs for consumers and soaring profits for oil companies, which forced an unprecedented recognition among U.S. lawmakers that the country, the largest oil consumer in the world, needs to hold the companies accountable, and that it also needs additional refining capacity.

Some U.S. oil companies have recently posted their highest profits in history. ExxonMobil corporation, the world’s largest oil company, reported a 75 percent increase in profits last month, including 9.9 billion dollars in the third quarter alone.

Testifying before a joint hearing of the Senate Energy and Natural Resources and Commerce, Science and Transportation Committees, the oil executives tried to turn the tables, urging Congress to open new lands for exploration and advocating fewer regulations as the only means to lower energy prices.

“What we definitely need is really the streamlining of regulations and permits,” said David O’Reilly, CEO of Chevron. “What we really need is access,” he said, referring to new exploration.


Officials from ExxonMobil, ConocoPhillips, BP America and Shell Oil also testified Wednesday and stuck to similar lines.

Democratic Leader Nancy Pelosi had called for the House of Representatives to pass measures providing U.S. consumers with relief from skyrocketing petrol and home heating prices.

“These companies have been given billions of taxpayer dollars in subsidies, tax breaks, and even ‘tax holidays’ from paying royalties due taxpayers from the production of oil from public lands,” she said.

Democrats have called for a House vote on a new bill, the Federal Response to Energy Emergencies (FREE) Act, which they say would protect consumers from price rigging by the energy industry.

The act would also give the Federal Trade Commission broad authority to crack down on price gouging for a wide range of fuels and for businesses all along the supply chain.

U.S. consumers who heat their homes with natural gas could see their fuel costs increase as much as 85 percent in some parts of the country, and those who use heating oil can expect to pay an average of 32 percent more.

“The average American family will spend 4,100 dollars on energy costs this year, translating for many into living closer to the financial edge,” said Steve Miller, president of the non-profit Americans for Balanced Energy Choices.

“Affordable energy is a vital part of Americans’ way of life to warm our homes, cook our food, and to light our dinner tables. In addition, soaring energy costs can rob American families of the opportunity to have affordable health care, housing, and nutrition.”

Democrats say they are willing to consider punitive measures like taxing windfall profits related to market manipulation. Some, like Democrat Ron Wyden of Oregon, appeared unconvinced by claims from the oil executives that they want to see 2.6-billion-dollar tax incentives to the industry provided in the energy bill passed in August repealed.

Independent watchdog and consumer groups have complained of price gouging and appealed for official intervention. Among the measures sought is for the White House and Congress to force ExxonMobil to invest some of its record profits in new refining capacity.

Environmental groups, including Greenpeace, argue that ExxonMobil should fulfill its legal obligations from a lawsuit that took place 16 years ago. The group demanded that the company compensate Alaskan fishermen for an oil spill that dumped 11 million gallons of crude oil into Prince William Sound in Alaska.

Fishermen and community members still have not been paid the five billion dollars awarded by a jury in punitive damages in 1994, says Greanpeace.

Other groups called for a criminal investigation. “We believe we have solid evidence that refiners have manipulated the reformulated gas market by reducing supplies and gouging consumers,” said Alan Dye, president of Gas Pump Watch, a consumer watchdog group that submitted an analysis to the Federal Trade Commission and the Justice Department alleging that the oil industry has illegally hoarded gasoline supplies to maximise profits.

“Big Oil is up to their old tricks, sticking it to consumers while laughing all the way to the bank,” said Dye.

The group claims that by acting in concert, the industry and refiners ensured that supplies are artificially limited, insulating refiners from competition, causing record price spikes and guaranteeing themselves hefty profits.

“Time and again, history has shown that Big Oil will distort competition in the marketplace to reap windfall profits on the backs of the American public,” Dye said. “They’re feathering their own nests on a bogus premise and they need to be called to account for their behaviour.”

But some pro-industry analysts have argued against any of these measures, particularly extra taxes on oil profits.

“If they enact a windfall profits tax or any other form of price control, the result will be the exact opposite of what consumers demand and their constituents need,” said Richard W. Walker of the Dallas-based National Centre for Policy Analysis.

Walker argues that Congressional intervention would place U.S. oil companies at a competitive disadvantage in the global energy marketplace and that it would dampen investment in domestic oil production.

 
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