Profits tax looms over Big Oil

Executives face hostile Congress today after amassing $32 billion as gas prices soared

up close

November 09, 2005|By KNIGHT RIDDER/TRIBUNE

WASHINGTON -- The stakes couldn't be higher for captains of the oil industry today when they appear before a joint hearing of two Senate committees to answer questions about the highest corporate profits ever.

One question sure to get their attention is why Congress shouldn't impose a windfall profits tax on them.

Beyond the expected theatrics at the joint hearing of the Senate's energy and commerce committees, there's a growing chance that Congress might target oil industry profits. That's because on Oct. 27, Exxon Mobil Corp. reported its largest quarterly corporate net profit, $9.9 billion, up 75 percent. Royal Dutch Shell reported profit growth of 68 percent; British Petroleum Co., 34 percent; Chevron Corp., 12 percent; and ConocoPhillips, 89 percent.

These five companies, whose executives will testify today, reported combined quarterly profits of $32.8 billion. That's $356 million a day for the 92-day third quarter. The money came from Americans paying record gasoline prices at the pump of more than $3 a gallon because of a tight global oil market and hurricanes that ravaged industry infrastructure along the Gulf Coast.

Gasoline prices have returned to pre-hurricane levels, but natural-gas home-heating costs are projected to soar by more than 60 percent in some parts of the nation. Opinion polls have found that the rising cost of energy surpasses health care as the top concern of American families.

That's why the heat is on the Republican-controlled Congress, which might find it necessary to go beyond a public mugging of the CEOs and take action.

Congress has acted once this year for the benefit of big energy companies. The energy bill that President Bush signed into law over the summer contained $7.4 billion in subsidies, tax credits and other aid, according to Taxpayers for Common Sense, a nonpartisan watchdog group.

Now lawmakers are singing a different tune. House Speaker Dennis Hastert, an Illinois Republican, recently warned that oil companies must do their part "to ease the pain" of Americans by using their record profits to build more refineries.

Sen. Charles E. Grassley, an Iowa Republican who chairs the Senate Finance Committee, wrote to oil executives urging them to donate 10 percent of their profits to a program that defrays home heating costs for the poor and elderly.

Sen. Judd Gregg, chairman of the Senate Budget Committee, proposes a windfall profits tax to help the poor and elderly this winter. In a statement, the New Hampshire Republican said, "I cannot sit back in good conscience while those in our society struggling to heat their homes are being left in the cold by oil companies."

Today's hearings, the first of their kind in decades, follow a call from Senate Majority Leader Bill Frist, a Tennessee Republican contemplating a 2008 run for the presidency, for oil company executives to explain their record profits amid an energy squeeze on average Americans.

Democratic Sen. Hillary Rodham Clinton of New York proposes an "alternative development energy fee" of up to $20 billion annually on oil profits.

Another Democrat, Sen. Byron L. Dorgan of North Dakota, proposes a 50 percent excise tax on oil profits when crude oil goes above $40 a barrel on global markets. His tax would return oil industry profits to consumers in the form of a rebate.

Testimony from the executives might be key to avoiding a windfall profits tax.

"If they don't come across as sympathetic to the plight of the consumer, there are going to be more incentives for the Congress to say, `This is too much and I've got to do something,' " said Frank A. Verrastro, director of energy programs for the Center for Strategic and International Studies, a conservative think tank in Washington.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.