Expect Sparks, No Flames, at U.S. Senate Oil Hearing
WASHINGTON Wednesday's Senate grilling of top U.S. oil industry executives is likely to be heavy on political theater but light on energy policy initiatives, analysts said.
Both Democrats and Republicans are expected to lambaste five Big Oil executives about their companies' $30 billion in collective profits last quarter, even as Americans paid record-high prices for gasoline to fill their tanks and natural gas to heat their homes.
Matt Simmons, chief executive of Houston-based investment firm Simmons & Co. International, said the hearing by the Senate's energy and commerce committees will be "the greatest gladiator event of 2005." About a third of the country's 100 senators are expected to be present.
"The five poor guys that have to come testify are actually the Christians. The Republican senators are the lions and the Democrats are the carrion birds," Simmons said.
Republican leaders have denounced soaring oil profits, feeling pressure from constituents and fearing an opening for Democrats to attack them ahead of the 2006 mid-term elections.
"I think the oil executives will get grilled very hard," said Pete Domenici, chairman of the Senate Energy Committee. "They better come prepared, they better bring their charts, they better show us what they're doing with this money."
Democrats clearly relish the chance to question oil companies.
"Oil companies need to tell us the truth. They need tell the American people how 75 percent profit increases in 90 days is justifiable to consumers at the pump and at home," said Washington Sen. Maria Cantwell, who sits on both the energy and commerce committees.
Cantwell is among many Democrats pushing for a law banning oil price profiteering during emergencies.
Other lawmakers -- both Republicans and Democrats -- are demanding a windfall profit tax on oil companies or a voluntary donation scheme to help fund a federal program that pays for poor families' winter heating bills.
Anchoring the panel is Lee Raymond, the stalwart chief executive of Exxon Mobil Corp.. The company banked its biggest-ever quarterly profit, $9.9 billion, last quarter. Also testifying will be chief executives of Chevron Corp. and ConocoPhillips, plus leaders of the U.S. units of BP Plc. and Royal Dutch Shell Plc.
Exxon's Raymond will later meet privately with House Speaker Dennis Hastert.
Two conservative Republicans who chair Senate committees -- Judd Gregg of New Hampshire and Charles Grassley of Iowa -- have urged major oil companies to share their bounty.
BOOM AND BUST
For its part, the industry says it's acting responsibly to balance the boom-and-bust cycle of crude oil prices.
"We have to manage through the cycle and also manage our financial structure through the cycle, and I hope we're going to be able to talk about that tomorrow," Raymond told CNBC.
In 1988, around the time when crude oil bottomed at around $10 a barrel, Exxon invested $15 billion in capacity projects, Raymond said. This year, when U.S. crude futures hit a record $70.85 a barrel, the company will invest about $18 billion.
Republicans, traditionally strong supporters of the U.S. oil industry, handed some $14.5 billion worth of incentives to energy companies in legislation this year. But politicians are growing more uneasy as Americans brace for winter heating bills which are forecast to jump to record highs.
Natural gas heating costs in the U.S. Midwest will soar by nearly 50 percent this winter, while heating oil in the Northeast will climb 25 percent, according to government data.
Oil executives should stand fast and refuse to be bullied, said Larry Goldstein, head of the Petroleum Industry Research Foundation. "If you show weakness in this kind of political environment where the political system is out for blood, the mere taste of blood will increase their appetite."