Re: E-85

. Josef Hebert
Associated Press
Nov. 10, 2005 12:00 AM

WASHINGTON - The chiefs of five major oil companies defended the industry's huge profits Wednesday at a Senate hearing where they were exhorted to explain prices and assure customers they're not being gouged.

There is a "growing suspicion that oil companies are taking unfair advantage," Sen. Pete Domenici, R-N.M., said in opening the hearing.

"The oil companies owe the American people an explanation," he said. advertisement

Lee Raymond, chairman of ExxonMobil 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 world's largest publicly traded oil company, earned almost $10 billion in the third quarter. Raymond was joined at the witness table by the chief executives of Chevron Corp.; Con- ocoPhillips; BPAmerica Inc., which is a division of BP PLC; and Shell Oil Co., a division of Royal Dutch Shell PLC.

Together, the companies earned more than $25 billion in profits in the July-September quarter as the price of crude oil hit $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 earnings are compared with the industry's enormous revenues.

But senators pressed Raymond to explain why in the aftermath of Hurricane Katrina some ExxonMobil gas station operators complained the company had raised the wholesale price of its gas by 24 cents a gallon in 24 hours. Is that not price gouging? they asked.

Raymond said he could not confirm the specific price increase, but that ExxonMobil had issued a directive "to minimize the increase in price while at the same time recognizing if we kept the price too low we would quickly run out (of fuel) at the service stations."

"It was a tough balancing act," said Raymond, who said it was not price gouging.

Although only 28 states have price-gouging laws, the head of the Federal Trade Commission cautioned against enactment of a federal price-gouging law.

"Price-gouging laws that have the effect of controlling prices likely will do more harm than good" and would be difficult to enforce, FTC Chairman Deborah Platt Majoras told the hearing held jointly by the committees of energy and commerce.

Sen. Barbara Boxer, D-Calif., made the issue personal, noting that the executives were reaping multimillion- dollar bonuses on top of multimillion-dollar salaries as "working people struggle" to pay for gasoline and face the specter of soaring home heating bills this winter. "Your sacrifice appears to be nothing," Boxer told the executives.

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

James Mulva, chairman of ConocoPhillips, said "we are ready to open our records" to dispute allegations of price gouging. His company earned $3.8 billion in the third quarter, an 89 percent increase over a year earlier. But he said that represents a 7.7 percent profit margin for every dollar of sales. "We do not consider that a windfall," Mulva said.

A 89 percent increase of profits over a year ago! Yet, only a 7.7 percent profit. If they arent reinvesting it, where is the money?