Oil companies deny price gouging

WASHINGTON — Energy prices shot up this year because short-term pressures led to low supplies and high demand, not because of price-gouging, oil industry executives told the Senate on Wednesday.

"We do not conduct, condone or tolerate price-gouging," said ConocoPhillips chairman James Mulva.

But several senators, including Republicans, chastised the chief executives of five major oil companies for being out of touch with average Americans burdened by higher gasoline and heating prices.

Consumers have a "growing suspicion that oil companies are taking unfair advantage," Sen. Pete Domenici, R-N.M., said at the start of the crowded, contentious hearing. "The oil companies owe the American people an explanation."

Oil industry profits soared this summer, even as millions of hurricane-battered consumers struggled to keep up with gasoline prices spiking to more than $3 a gallon.

At ConocoPhillips, net income jumped to $3.8 billion in the July-September quarter, an 89 percent increase over the same period a year ago. But Mulva said that represented a profit margin of just 7.7 cents per dollar of sales, about the average for all industries.

"We don't see a windfall," Mulva said.

Some in Congress do. A number of Democrats have been calling for a "windfall profits" tax to provide revenues to help lower-income consumers pay energy bills.

Analysts expect Americans to face about a 50 percent rise in home heating bills this winter. Though they have declined in recent weeks, gasoline prices still are running roughly 20 percent higher than a year ago.

Meanwhile, oil stock prices are about 40 percent higher than a year ago, providing shareholders with big gains.

Mulva said oil companies may appear to be reaping a bonanza, but only to people who don't appreciate "the enormous levels of investment required to achieve those earnings and bring new energy supplies to the market."

Testifying before at a joint hearing of the Senate committees on energy and commerce, he was flanked by executives of Exxon Mobil Corp., Chevron Corp., BP America Inc. and Shell Oil Co.

The hearing got off to a rough partisan start with Democrats requesting that the executives be sworn to tell the truth. That would have forced the five men to stand with right hands raised, providing photographers with a pose that might suggest they were involved with a criminal matter.

Commerce Committee Chairman Ted Stevens, R-Alaska, angrily refused to swear in the witnesses.

"These witnesses accepted the invitation to appear before the committee voluntarily," Stevens said. "I shall not administer an oath today."

Sen. Daniel Inouye of Hawaii, the Commerce Committee's highest-ranking Democrat, said the executives ought to be eager to demonstrate their willingness to tell the truth. "If I were a witness, I would prefer to be sworn," he said.

The Democrats, before launching their own tough questioning, also complained that no consumer advocates were invited to testify.

Sen. Barbara Boxer, D-Calif., displayed a chart showing the lucrative bonuses that oil executives have been getting amid record profits. While millions of Americans are suffering in the aftermath of the hurricanes, "your sacrifice appears to be nothing," she told the executives.

Exxon Mobil Chairman Lee Raymond said he is aware that high energy prices "have put a strain on Americans' household budgets."

But he said surging demand for oil and tight supplies, especially after Hurricanes Katrina and Rita hit, caused a short-term run-up in prices for consumers all over the world. Because of global market fluctuations from year to year, profits "go up and down," he said.

Senate Majority Leader Bill Frist, R-Tenn., said in a statement after the hearing that the executives "did not ... adequately answer the question of whether the sky-high gas prices we saw earlier this fall were entirely justified.

He said the Senate Permanent Subcommittee on Investigations would "continue to investigate whether any price-gouging occurred."

At the White House, spokesman Scott McClellan said President Bush believes "energy companies can and should do more" to help lower prices.

"They are seeing record-high profits and they ought to be investing those profits back into energy infrastructure, investing those profits back into expanding refining capacity and addressing the pipeline concerns," McClellan said.

In recent weeks, Energy Secretary Samuel Bodman has said repeatedly he opposes a windfall profits tax.

Nevertheless, Sen. Byron Dorgan, D-N.D., and Sen. Christopher Dodd, D-Conn., are preparing legislation to impose a 50-percent windfall profit tax, as long as crude oil prices remain more than $40 a barrel. Currently, oil is trading around $60 a barrel.

Marilyn Geewax's e-mail address is marilyng(at)coxnews.com