WASHINGTON – The nation's biggest oil companies will defend their combined quarterly profits of more than $30 billion on Wednesday at a Senate hearing where lawmakers are expected to demand why Americans face record heating bills this winter.
It remains unclear whether the hearing will lead to any new energy legislation, or simply be a vehicle for both Republicans and Democrats to assure voters of their concern about high prices.
The first witness will be Lee Raymond, the gruff chief executive of Exxon Mobil Corp. (XOM), which earned its biggest-ever profit, $9.9 billion, on revenue of more than $100 billion in the third quarter. Raymond is retiring in a few weeks after 12 years of leading an oil company regarded by Wall Street analysts as one of the best run in the industry.
Republican lawmakers, who pushed through a bill this year packed with $14.5 billion in energy industry incentives, said they will ask tough questions about the fat profits.
"They better come prepared, they better bring their charts, they better show us what they're doing with this money," said Pete Domenici, chairman of the Senate Energy Committee.
However, Domenici will not require the five executives to take an oath. That will avoid an embarrassing photo akin to when tobacco executives raised their right hands at a 1994 congressional hearing and swore cigarettes were not addictive.
Several plans have been floated by Republicans and Democrats for a windfall-profits tax on oil and stiff penalties against profiteering. None have gained any traction.
Republican Charles Grassley, head of the Senate Finance Committee, said he tried to "embarrass" the industry into donating 10 percent of profits to help poor Americans pay winter heating costs. A more modest House Republican bill wants to waive the $10 federal fee to collect firewood in national forests to help families cope with the high heating costs.
U.S. crude oil, which soared to a record $70.85 a barrel soon after Hurricane Katrina lashed Louisiana, is now below $60 a barrel thanks to mild autumn weather. The average retail price of gasoline topped $3.07 a gallon after the storm, but has tumbled to $2.38 a gallon.
However, more sticker shock is on the way. The U.S. government on Tuesday forecast natural gas heating costs in the U.S. Midwest this winter will soar nearly 50 percent, while heating oil costs in the Northeast rises 25 percent.
Democratic Sen. Charles Schumer of New York said "there is no question" that major oil companies engage in profiteering after disasters such as Hurricane Katrina. "The least they can do is give some back," he said, and if companies are unwilling to donate money voluntarily, "we ought to force it to happen."
Exxon's Raymond said a new tax could discourage investments in refineries. "If there's an excise tax, what that means is over the cycle we're going to have less earnings than we would have had, and therefore our ability and our willingness to invest is going to diminish," Raymond told CNBC television.
The energy industry is still picking up the pieces from Hurricanes Katrina and Rita. Full crude-oil and natural-gas production from the U.S. Gulf of Mexico will not be restored until June, according to a new government estimate.
Democrats at the Senate hearing were expected to ask the executives to help fund the Low Income Home Energy Assistance Program (LIHEAP). The program spent $2.2 billion last year on heating bills of poor Americans. Republicans have blocked attempts to double the fund to keep up with surging prices.
Exxon's Raymond was also scheduled to meet privately with House Speaker Dennis Hastert, an Illinois Republican who wants the industry to invest more in expanding oil refineries.