Oil industry in the hot seat

Executives face questions about profits from members of Congress in both parties

November 08, 2005|By RICHARD SIMON | RICHARD SIMON,LOS ANGELES TIMES

WASHINGTON -- Oil industry executives summoned to Capitol Hill are expected to receive a grilling this week - perhaps unlike any they have received before - about their record profits at a time of high oil prices.

But the questions won't just be coming from the usual critics. Some of the industry's traditional Republican allies are eager to show that they, too, share their constituents' anger over high prices and record profits.

The hearing, ordered by Senate Republican leader Bill Frist of Tennessee, illustrates the political pressure that is driving Republicans to make a show of getting tough on an industry that has been a major source of GOP cash.

Beyond the Senate hearing, House Speaker J. Dennis Hastert, an Illinois Republican, is preparing to call oil company executives to a meeting to confront them on what they are doing to boost fuel supplies and bring down prices.

Lee Raymond, chairman and chief executive of ExxonMobil Corp. - which posted a $9.9 billion third-quarter profit, up 75 percent from a year earlier - is among those scheduled to testify at the hearing tomorrow before the Senate commerce and energy committees.

Also due to appear are Chevron chairman and chief executive David O'Reilly; ConocoPhillips chairman and chief executive James Mulva; Ross Pillari, president and chief executive of BP America Inc.; and Shell Oil Co. President John Hofmeister.

While it is unclear whether the hearing will produce legislation, oil industry profits already have generated unusual demands from Republicans.

One Republican has joined Democrats in calling on Congress to consider a windfall-profits tax. Another Republican, Sen. Charles E. Grassley of Iowa, wants to challenge industry executives to donate 10 percent of their profits toward home-heating subsidies for low-income families. Grassley does not serve on the committees that will hear from the oil industry but plans to ask colleagues who sit on those panels to relay his proposal.

Sen. Larry E. Craig, an Idaho Republican, said that Grassley's proposal might be a good idea for an industry "looking for some good PR at this moment."

Lawmakers "clearly want some explanation" for the industry's recent boost in profits, "and if those explanations are not satisfactory, they'll do something about that," said GOP pollster David Winston. For example, he said, lawmakers could consider rescinding tax breaks provided in a big energy bill passed earlier this year or ordering audits of oil company books.

Marshall Wittmann, a former Senate Republican aide who is now with the centrist Democratic Leadership Council, doubted that the Republican-controlled Congress would impose a windfall-profits tax.

"It's very unlikely that a Republican Congress will actually pass legislation that has teeth that will bite some of their largest contributors," he said.

The oil and gas industry was a major source of campaign funds for Republican congressional candidates, contributing $13.3 million in the 2004 election cycle, according to the Center for Responsive Politics, a campaign finance watchdog. Democratic congressional candidates received about $3.3 million.

Pump prices have eased from their highs after Hurricane Katrina of $3.057 a gallon for self-serve regular reached on Labor Day, according to AAA's daily price survey. The U.S. average was $2.383 a gallon yesterday, according to AAA.

But lawmakers from both parties - especially from cold-weather states in the Northeast and Midwest - are getting an earful about gasoline prices and are bracing for more political fallout through the winter because of projected increases in home heating bills.

Democrats also have increasingly sought to make energy prices a campaign issue heading into next year's congressional elections.

The executives are expected to explain what are they doing to increase fuel supplies as well as contrast their profits with those of other industries. The oil industry has said that its profits are cyclical and are not out of proportion to income earned by other industries when measured over several years.

In addition, oil companies say, energy exploration requires large investments, which could not be made if the companies were not making money.

Richard Simon writes for the Los Angeles Times.

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