Congress grills Big Oil on prices

The top five oil companies, testifying before Representative Edward Markey's (D-MA) Select Committee on Energy Independence and Global Warming, insisted that their 125 billion dollar profit last was "in line with other industries."

Representative Markey's take on the profits:
“On April Fool’s Day, the biggest joke of all is being played on American families by Big Oil, while using every trick in the book to keep billions in federal tax subsidies even as they rake in record profits,” said Rep. Edward Markey, D-Mass. [video]

As reported in this article, Congress to drill for answers on oil prices, both the House and the Senate are holding hearings this week regarding the record profits by oil companies. The House hearings are focusing on the actual profits by the big five oil companies; Exxon Mobile, Chevron, ConocoPhillips, BP and Royal Dutch Shell.

The Senate investigation will be on the impact of investors on rising prices.

Lawmakers were looking for answers to the soaring fuel costs a day after the Energy Department said the national average price of gasoline reached a record $3.29 cents a gallon and global oil prices remained above $100 a barrel although supplies of both gasoline and oil seemed to be adequate.

In November, 2005, Hofmeister and the top executives of the same companies represented Tuesday, sat in a Senate hearing room to explain high prices and their h&uge profits. The prices are of concern, Hofmeister said at the time, adding a note of optimism: "Our industry is extremely cyclical and what goes up almost always comes down," he told the skeptical senators on a day when oil cost $60 a barrel.

Oil recently reached a high of $111 a barrel.

The increase in the price of gasoline is hitting all sectors of the American economy. Truckers, dependent upon high diesel prices, have been particularly hard hit, leading to an increase in the inflation index for the products they carry. This ranges from milk to hardware to the price increase announced by Delta Airlines today due to high fuel costs.

The prepared testimony by the oil executives included statements that their profits were in line or just above Dow Jones averages, that their industry was cyclical (note chart above), and that they needed the profits to reinvest in research and development into alternative fuels.

The amount of their investment into alternative fuels over the last five years?

$3.5 billion.

The amount, again, of their profit from last year alone?

$123 billion.

Today's hearing has particular import in that it intends to explore the justification for the ~$18 billion dollars in federal subsidies and tax breaks the oil companies receive on an annual basis.

“Imposing punitive taxes on American energy companies, which already pay record taxes, will discourage the sustained investment needed to continue safeguarding U.S. energy security,” J.S. Simon, Exxon Mobil’s senior vice president said.

“These companies are defending billions of federal subsidies ... while reaping over a hundred billion dollars in profits in just the last year alone,” Representative Markey responded.

The House has twice attempted to past bills that would remove the $18 billion in tax breaks and subsidies and divert the funds to research and development into alternative fuels

President Bush has threatened to veto any such legislation.