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Oil executives taken to task over soaring pump prices

· Energy firms lambasted over ballooning profits
· ExxonMobil ‘too sceptical’ on renewable fuels

Andrew Clark in New York
The Guardian
Wednesday April 2 2008
 

American lawmakers told top oil executives on Capitol Hill yesterday the laws of supply and demand were an inadequate excuse for rocketing petrol prices, ballooning profits and for slow progress on investment in renewable fuels.

Senior figures from BP, Shell, ExxonMobil, Chevron and ConocoPhillips were summoned to Washington to appear before the select committee on energy independence and global warming – a body established last year after the Democrats seized control of Congress.

The executives were asked to explain why they are fighting to hang on to $18bn (£9bn) in US tax breaks when their combined profits hit a record $55bn last year and prices at the petrol pump reached a new high of $3.28 a gallon on Monday.

During a heated session, John Larson, a Democrat from Connecticut, asked: “What do you say to the lady who has to turn over her entire social security cheque to pay for gas? That the laws of supply and demand are in effect?”

The Democrat-dominated committee pointed out that the US’s poorest 20% of households were spending more than 10% of their weekly budgets on fuel.

“The perception is terrible,” said Emanuel Cleaver, a Missouri Democrat. “People talk about perceptions of Congress and of our approval ratings. Your approval ratings are lower than ours – and that means you’re down low.”

The oil firms argue that tax breaks are essential to encourage investment in new sources of production. They want to be allowed to access environmentally sensitive drilling areas such as the offshore outer-continental shelf. “We know high energy prices are having an impact on the economy and on your constituents who are also our customers,” said BP America’s president, Robert Malone, who blamed global economics.

“We can’t change the world market on which this nation relies for 60% of the oil it consumes.”

ExxonMobil came under particularly fierce attack for its reluctance to pump funds into renewable fuels. The firm, which made $40bn last year and paid out $7.5bn in dividends and executive pay, has a budget of only $100m for renewables, which is spent on a research project at Stanford University.

Ed Markey, the committee’s chairman, said alternative sources such as wind, energy and solar were the only long-term solution to get around soaring oil prices. “People are being tipped upside down and having money shaken out of their pocketbooks and your message is you can’t do anything for them,” Markey said to Exxon’s senior vice-president, Stephen Simon. “You’re going to begin a research partnership to think about it.”

Exxon has taken the most sceptical line of any major oil company towards alternative fuels. Simon said the company did not believe that existing technologies in this area were viable – and the company was hoping to “leapfrog” to a new generation of techniques.

“We had the best and brightest minds look at this on a fundamental basis,” said Simon. “Current technologies do not have an appreciable impact on the challenges you want to meet.”

Democrats in Congress recently voted to take away tax breaks for the oil industry, many of which were initiated in 2004 and 2005. But President Bush has vowed to veto any bill that seeks to remove these privileges.

BP was the only one of the five companies represented that confirmed it had taken part in a controversial energy taskforce chaired by vice-president Dick Cheney. The taskforce, set up in 2001, provoked ire from environmentalists, who complained that they were shut out.

This article appeared in the Guardian on Wednesday April 02 2008 on p25 of the Financial section. It was last updated at 00:06 on April 02 2008.

http://www.guardian.co.uk/business/2008/apr/02/oil.useconomy

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