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Today Online: After record profits, oil companies see backlash: Business: Monday, October 31, 2005  
After record profits, oil companies see backlash
Time is GMT + 8 hours
Posted: 31-Oct-2005 06:01 hrs
Exxon logo at a gas station. A profit bonanza for major oil companies has sparked a backlash among US lawmakers and others, who argue the gains should be used to help ease consumers' pain from record energy prices.
 
 
A profit bonanza for major oil companies has sparked a backlash among US lawmakers and others, who argue the gains should be used to help ease consumers' pain from record energy prices.
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The scrutiny intensified after Exxon Mobil, the world's biggest oil company, posted a profit of 9.92 billion dollars for the third quarter -- the biggest in US corporate history.
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That brought the Texas firm's earnings for the first nine months of the year to 25.42 billion dollars -- more than the gross domestic product of Luxembourg.
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Other global oil companies were not far behind with hefty profits: Royal Dutch Shell (9.03 billion dollars), British oil giant BP (4.41 billion), US-based Chevron (3.6 billion) and ConocoPhillips (3.8 billion).
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Democratic Senator Charles Schumer said the 29 major oil and gas firms in the Standard and Poor's 500 stock index are expected to earn 96 billion dollars this year -- up from 68 billion dollars last year and 43 billion dollars in 2003.
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"It's become perfectly clear that the big oil companies are cashing in while average American families are being bled dry," Schumer said.
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Schumer and other Democrats are pressing for legislation to tax the "excess" profits of oil firms to fund heating assistance programs, recovery from Hurricane Katrina and other programs.
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Republican lawmakers, who are generally more laissez-faire on business, said oil companies must show they are acting responsibly to avoid congressional action.
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Senate Majority Leader Bill Frist called for hearings into possible price-gouging.
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"Oil and gas companies are enjoying record profits. That is fine. This is America," House of Representatives Speaker Dennis Hastert said.
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But he added: "Our oil companies need to do more to inform the American people about what they are doing to bring down the cost of oil and natural gas. When are new refineries going to be built?"
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Crude oil prices are up some 80 percent over the past year. Gasoline is expected to be 27 percent higher in 2005 and US households can expect a 48 percent jump in heating costs for natural gas, according to the Energy Department.
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The energy companies have been taking a low profile in the face of the criticism, while noting that they are investing heavily in exploration and refining.
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The oil industry's recent ad campaign talks about environmental efforts, conservation and the need for investing in new technologies.
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Some argue that a heavy tax on the oil industry could backfire by discouraging investment.
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Henry Hubble, Exxon Mobil's director of investor relations, said the issue is a "tightness of supply versus demand," and the best way for lawmakers to stimulate supply is to step back and let the markets work.
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"If you're trying to encourage supply growth, it seems odd to put in place disincentives," he said.
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The American Petroleum Institute defended the industry by pointing out that the industry has lower profit margins than other industries such as banking and pharmaceuticals.
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"The oil and natural gas industry is probably one of the world's largest industries," the API said.
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"Its revenues are large, but so are its costs of providing consumers with the energy they need. Among those are the cost of finding and producing oil and natural gas and the costs of refining, distributing and marketing it."
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But Republican Senator Judd Gregg said there are limits to the patience of the US public and politicians, and called for "a serious look at reinstituting an excess profit tax on oil companies with the proceeds being put towards the low-income home energy assistance program and deficit reduction."
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With fuel costs out of control and profits at record levels, Gregg said, "it is apparent that the oil companies have taken advantage of the trust of the American people."
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"Some might call this a novel approach for me, but 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," the senator said. AFP
 
 

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