Oil Ascends the Hill
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Oil executives went to Washington and tried to convince Congress not to siphon off any of their billions in third-quarter profits. In the end, lawmakers probably won't do much damage to Big Oil's bottom line -- but falling oil prices may, and soon.
The world's five biggest oil companies by revenue -- Exxon Mobil, BP, Royal Dutch Shell, Chevron and ConocoPhillips -- together made nearly $33 billion in the third quarter, when oil prices skyrocketed on strong demand and tight supplies made more scarce by destructive Gulf Coast hurricanes. When voting constituents are complaining bitterly about the cost of filling up their Navigators and Hummers, such wealth doesn't sit well with lawmakers of either party, and Republicans and Democrats have called for Big Oil to hand over some of its cash through a windfall profits tax, a handout to poor families or some other measure. Critics have warned that such redistribution could discourage oil companies from investing in new production and refining capacity. They point to a windfall tax enacted in 1980, when oil hit its inflation-adjusted peak, and said the measure only resulted in more reliance on foreign oil. Appearing before Congress today, executives from the top five oil companies agreed, adding that their profits are cyclical and complaining that their recent windfall doesn't begin to make up for a dry spell that lasted for two decades.
But perhaps their best defense against a profit tax was in New York, at the Mercantile Exchange, where crude-oil futures prices fell to less than $59 a barrel after the Energy Department said U.S. oil and gasoline inventories rose more than analysts expected last week. Though still very high, crude-oil futures have fallen nearly 16% since late August, and gasoline futures have fallen 40%. Congressional outrage over Big Oil profits coincided with the downturn of energy prices in the early 1980s and 1990s. History may be repeating itself.
In any event, when all the shouting is done, it seems unlikely that Congress will force oil companies to pay much penance for their wealth. If it's any indication, lawmakers certainly treated the oil executives with more deference than they have treated tobacco executives and baseball players in past hearings. Those witnesses were forced to raise their right hands and swear to tell the whole truth and nothing but the truth, while Republican leadership let oil executives speak today without swearing such an oath.
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