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Reuters: Oil execs to take heat from lawmakers Tuesday

Monday March 31, 3:35 pm ET
By Chris Baltimore

WASHINGTON (Reuters) – Five U.S. oil company executives set to testify on Capitol Hill on Tuesday about soaring gasoline prices and record industry profits will likely offer a common defense: It’s not our fault.
 
U.S. average pump prices have risen steadily since the beginning of 2008 and recently hit a record above $3.20 a gallon, heaping yet more pressure on a U.S. economy beleaguered by an imploding housing market and recession fears.

Rep. Ed Markey of Massachusetts, a long-time oil industry critic and chairman of the House Select Committee on Energy Independence and Global Warming, will chair the hearing called “Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives.”

Executives from the three biggest U.S.-based oil companies — Exxon Mobil Corp (NYSE:XOM – News), Chevron Corp (NYSE:CVX – News), and ConocoPhillips (NYSE:COP – News) — will attend, as well as U.S. representatives of BP Plc (LSE:BP.L – News) and Royal Dutch Shell (LSE:RDSA.L – News).

With heated questions expected from Markey and other Democrats on the panel, oil executives are likely to point to U.S. crude oil prices, which have skyrocketed from below $20 in early 2002 to a record $111.80 a barrel earlier this month.

“Gasoline and diesel prices are being set in what we consider to be a crude-driven market,” said Red Cavaney, president of the American Petroleum Institute, which lobbies on behalf of big U.S. oil companies.

In other words, there is no shortage of refined products like gasoline, heating oil and jet fuel, and U.S. companies have little control over a world market dominated by geopolitical events like supply disruptions in Venezuela, Nigeria and Iraq.

“This is a well-supplied market,” said API chief economist John Felmy, pointing to plentiful U.S. stockpiles of crude oil and gasoline.

According to the U.S. Energy Information Administration, about 70 percent of the February 2008 average pump price of $3.03 a gallon was crude oil, with 17 percent from refining and marketing costs and 13 percent from taxes.

Markey has pointed out that even though Exxon earned a record $40.6 billion in 2007, oil companies have opposed a push by congressional Democrats to strip about $18 billion in tax breaks from big oil companies and put them toward planet-friendly energy alternatives like wind and solar.

The API’s Cavaney said oil company profits actually come in lower than other sectors like pharmaceuticals, and that private U.S. companies rely on their giant scale to compete with state-owned oil companies like Saudi Aramco.

“We continue to hear this idea about we make these massive amounts of dollars of profit,” Cavaney said. “But again, the dollars are large because the companies’ competition is the huge national oil companies,” which control the lion’s share of global supply.

The image of oil executives raising their right hands and swearing to tell the truth about their influence over pump prices is a perennial event in Washington.

The last time U.S. lawmakers called such an expansive oil company hearing was in March 2006, in the upshot of the 2005 Gulf Coast hurricanes.

Industry witnesses at Tuesday’s hearing are: Stephen Simon, senior vice president of Exxon Mobil; Peter Robertson, vice chairman of Chevron; John Lowe, executive vice president of ConocoPhillips; John Hofmeister, president of Shell’s U.S. subsidiary, and Robert Malone, chairman of BP’s U.S. subsidiary.

(Reporting by Chris Baltimore, editing by Matthew Lewis)
 
http://biz.yahoo.com/rb/080331/usa_oil_congress.html?.v=2

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