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THE NEW YORK TIMES: Sympathy as Hard to Find as Oil

Sympathy as Hard to Find as Oil

Jeff Chiu/Associated Press

A gas station in San Francisco had the dire news on display for all to see in late April. Little if any relief is expected through summer.

Published: May 3, 2006

WASHINGTON, May 2 — Just last November, Senate Republican leaders extended an unusual privilege to five of the nation's top oil executives. To prevent what might seem like a “perp walk,” the officials entered a Senate hearing room outside the whirl of television and press photographers, who had been briefly shooed away from the site.

Moreover, the officials were not required to take an oath, avoiding the infamous imagery created when tobacco company executives lined up, right hands in the air, and then proceeded to uniformly declare before a Senate panel that cigarettes were not addictive.

But as gasoline prices have soared again in recent weeks, to more than $3 a gallon, the industry is no longer receiving the same courtesy. Not only were executives from Exxon Mobil, Chevron, ConocoPhillips, BP and Royal Dutch Shell compelled to return to Capitol Hill in March — this time to testify under oath — but they have also faced mounting attacks from lawmakers on both sides of the aisle.

Senator John McCain, Republican of Arizona, took the major oil companies to task last week over their profits: “Outside of satanic cults, these people have the worst P.R. of anybody in the world.”

It's not for want of trying. In their latest counteroffensive to that type of demonization, the big oil companies and their trade groups have stepped up their own campaigns, spending millions of dollars on television, radio and newspaper advertisements in hopes of blunting the reaction.

The public relations effort, coupled with a huge lobbying network here in Washington, is aimed at both consumers and lawmakers, who are joining in a louder chorus of voices calling for such previously heretical ideas on Capitol Hill as a new windfall profits tax and a repeal of some of the tax breaks and other incentives Congress provided the industry just last year in its energy legislation.

The industry can already claim an early success, with big-business interests quickly persuading the Senate leadership to drop a provision that would have increased taxes on inventories not just of oil companies but of other industries as well. But that was just the opening skirmish in what the energy companies now see as a long bruising battle ahead.

The oil companies, like Gen. Ulysses S. Grant, are certainly prepared to fight it out all summer. Last year alone the top 10 oil companies spent more than $30 million on their lobbying battalions.

And they have recently lined up additional firepower, enlisting familiar Washington figures like the former Reagan official, Michael K. Deaver, and former Senator J. Bennett Johnston of Louisiana, the architect of the royalty relief package for gulf exploration in the 1990's that is now bedeviling the image of an industry awash in billions of dollars of extra profits.

“We can no longer be fortress America,” said Red Cavaney, president of the American Petroleum Institute. “I think we, like other industries, have been slow in understanding the need to communicate what we're doing to the public and opinion makers.”

For its part, the petroleum institute has brought on Blue Worldwide, the advertising arm of Edelman Public Relations and the Hawthorn Group. As oil industry profits soared, it started a campaign of full-page newspaper ads, arranged for dozens of op-ed articles, and produced television and radio commercials in an effort to explain why gas prices have risen so much.

The campaign has cost the institute more than $20 million over the last several months, though this is minuscule when set against the profits most oil companies have been making. Even BP, the only major to report a drop in earnings for the quarter, still had net income of more than $5 billion. Chevron said profit rose 49 percent in the quarter.

The trade group, along with others representing refineries and independent producers, has developed a set of talking points: the impersonal forces of demand have outstripped supply, particularly as China's industrial expansion has added a new force to the global economy; oil industry profits are not outsize by the standards of other major industries; Western oil companies have only a limited share of the crude oil market, which is now dominated by OPEC and other oil-producing nations.

Many cite a federal study to try to prove that the last go-round on a windfall profits tax reduced production and jobs.

But while there is certainly a fair amount of political posturing on the part of those attacking the industry, oil companies are also finding that fewer lawmakers are willing to listen to their case. Senator John Cornyn, Republican of Texas and a staunch defender of his home state's oil interests, said the industry's reputation had indeed plummeted.

He acknowledged that the industry might have to give up some subsidies or incentives that no longer seem necessary in light of the “extraordinarily high profits.”

“I'm not sure what they can do about it,” Senator Cornyn said of the industry's image.

“I think what they need to do is tell their story, which has to do with the amount of money they actually invest to develop additional supplies,” the best way that the industry can help bring down prices.

One figure stepping forward as the new public face of the industry is Rex W. Tillerson, who took over as Exxon's chief executive at the beginning of the year. While his predecessor, Lee R. Raymond, was better known for his dismissive attitude toward public opinion, Mr. Tillerson has tried to address the “huge challenge” the industry faces in dealing with the global energy market.

“It's important that the American consumer understands the fundamentals of what's going on,” said Mr. Tillerson in a brief interview on Tuesday between appearances at public policy forums here, meetings with Republican leaders, and a planned television interview on NBC's “Today” show on Wednesday. “To the extent we can explain that in terms that people can understand, I hope that would be helpful.”

On another front, smaller independent natural gas and oil producers, which are centered in the oil-patch states of Texas, Louisiana and Oklahoma, are hoping that their hometown image and grassroots connections will help quell the fever.

“The oil and natural gas industry is very misunderstood by the public and, from what we've seen over the past week, by Congress,” said Jeff Eshelman, vice president for public affairs at the Independent Petroleum Association of America, which lobbies on behalf of its 5,000 large and small independent oil and natural gas producers. “Congressional efforts have really been misguided: they've done nothing to lower gasoline prices; they've done nothing to increase supplies.”

But industry and trade officials concede that lawmakers are in no mood right now to contemplate long-term solutions to today's energy situation.

Republicans like Senator Charles E. Grassley of Iowa, chairman of the Finance Committee, and the ranking Democrat, Max Baucus of Montana, recently demanded that the top 15 oil companies turn over their tax returns. Mr. Grassley has called for some oil profits to be used to help finance the low-income home heating program, an idea the industry has rebuffed.

Arlen Specter, Republican of Pennsylvania, has joined two Democrats, Senators Byron L. Dorgan of North Dakota and Christopher Dodd of Connecticut, to push for a profits tax on the industry.

Mr. Johnston, the former senator now representing the industry, said he hoped to slow the bandwagon by reminding them of the past. “I've got one of the most expensive energy educations that Americans can have, expensive because we made a lot of mistakes with synthetic fuels, windfall profits,” he said. “I've seen all those mistakes made, so that experience is very good.”

Both industry officials and Congress recognize the potency of gas prices as a lever at the polls. The oil industry is a powerful campaign donor, with more than $1 million being donated to federal candidates in 2005 and the first three months of this year by the top 10 oil industry political action committees, largely to Republicans, according to the PoliticalMoneyLine, an online Web site that compiles finance data.

“This is an election year and our organization does have a political action committee,” Mr. Eshelman said. “We are making it one of our priorities to raise funds for the political action committee and we will be involved in the upcoming elections.”

Money talks, of course, but business lobbyists are also working overtime trying to persuade lawmakers to avoid rushing to judgment.

“I have never seen so much confusion in my entire life,” said William Kovacs, vice president for environment, technology and regulatory affairs at the United States Chamber of Commerce. “They're all hoping that if they throw enough stuff at the wall, something will stick. We shouldn't be doing energy policy in the middle of a crisis.”

For all his effort to help the industry, Mr. Johnston admits to feeling a little ambivalent about the whole circus atmosphere surrounding oil prices.

“I think it's a great issue for Democrats and I'm a Democrat,” he said. “So I hope they win.”

Still, he added: “I'm on the side of a lot of Democrats who feel the other way, but look, some we agree or disagree on. So what else is new?”

Kate Phillips reported from Washington for this article and Julie Bosman from New York.Jad Mouawad contributed reporting from Washington.

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