Oil Chiefs Face Senate on Windfall Tax

The chairman of Exxon Mobil, Lee Raymond, said Congress should avoid “punitive” policies that interfere with oil-industry profits because they would discourage investments in exploration and refining.Some members of Congress proposed taxing oil profits as they soared to records this year. The money might be used to fund government home heating assistance, a plan similar to the windfall profits tax enacted by President Carter 25 years ago. Government efforts to control the energy markets in the 1970s created shortages and soaring prices, Mr. Raymond said.“There are no quick fixes,” Mr. Raymond told a Senate hearing yesterday in Washington.” History teaches us that punitive measures, hastily crafted in reaction to short-term market fluctuations, will likely have unintended negative consequences.”Record gasoline and heating oil prices raised a chorus of criticism of the oil industry. House Speaker Dennis Hastert repeated demands yesterday from last month that more oil industry profit go directly to investments to boost supplies. Senate Majority Leader Frist called Mr. Raymond and his counterparts at Chevron and ConocoPhillips to Washington to explain their profits.The oil executives failed to “adequately answer the question of whether the sky-high gas prices we saw earlier this fall were entirely justified and whether their companies’ profit margins are appropriate given the hardships consumers are facing,” Dr. Frist said yesterday in an e-mailed statement.Net income for Exxon Mobil and the rest of the top five publicly traded energy producers – BP, Royal Dutch Shell, Chevron, and Total SA – jumped 52% in the third quarter to a combined $33.4 billion.The chief executive of ConocoPhillips, James Mulva, and the chairman of Shell in America, John Hofmeister, joined Mr. Raymond in telling the senators that a windfall profits tax is a bad idea. Such a tax would “drain” investment capital, Mr. Mulva said.Mr. Raymond defended the industry’s profits and sought to explain how they relate to investment plans. “Our numbers are huge because the scale of our industry is huge.”Exxon Mobil keeps investments steady over many years, whether oil is around $10 a barrel as in 1998 or near $60 as it is today, Mr. Raymond said. “In politics, time is measured in two, four, or six years, based on the election cycle. In the energy industry, time is measured in decades, based on the life cycle of our projects.”Prices are near the peak of one of their cycles, Mr. Raymond said yesterday.“Energy companies can and should do more,” a White House spokesman, Scott McClellan, said yesterday. “They are seeing record-high profits and they ought to be investing those profits back into energy infrastructure.”The outcry over oil industry profits arose after hurricanes Katrina and Rita in late August and September. The storms shut oil platforms in the Gulf of Mexico and flooded refineries that were already stretched to their limits by record demand. New York crude oil jumped above $70 a barrel for the first time, and the average gasoline pump price in America topped $3 a gallon.Oil companies are benefiting from record prices while consumers are hurt, Senator Dorgan, a North Dakota Democrat, said yesterday in an interview.Mr. Dorgan, Senator Reed of Rhode Island, Senator Schumer, and other Senate Democrats have proposed new taxes on to fund heating-assistance programs for the poor or reimburse public schools for some heating expenses.Boone Pickens, the Dallas hedge fund manager who predicted more than a year ago that oil prices would top $60 a barrel, said he doesn’t expect a windfall profits tax to get through Congress.“I don’t think it makes any sense” to put a special levy on the oil industry, he said in an interview in New York.The White House opposes such taxes, U.S. Energy Secretary Samuel Bodman said last month. President Carter in 1980 signed the Crude Oil Windfall Profit Tax Act as government price-controls were being phased out. It was repealed in 1988 after raising less money than expected because oil prices collapsed.

Oil Chiefs Face Senate on Windfall Tax

Oil Chiefs Face Senate on Windfall Tax

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