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Oil companies ask Congress to allow more US exploration, reduce supply

Forbes

Oil companies ask Congress to allow more US exploration, reduce supply

05.21.08, 12:51 PM ET

WASHINGTON (Thomson Financial) – Major oil companies today called on members of the US Senate to help ensure a growingsupply of US oil and gas by allowing expanded energy exploration in the US, and avoiding higher taxes on oil companies that would limit their ability to invest in energy development.

‘Congress has recently made some hard policy choices on renewables and energy efficiency,’ said Peter Robertson, vice chairman of the board of Chevron (nyse:CVX – news – people ) Corp. ‘We hope you can also make the equally hard choices to open up more federal lands and allow us to responsibly produce more American oil and natural gas, which can supply us for decades to come.’

John Hofmeister, president of Shell Oil, said his company and others are prohibited from exploring for more energy resources in the majority of US lands and offshore, and prohibited from even analyzing potential resources in several areas.

‘The cumulative effect of these policies has been to discourage US investment and send US companies outside the United States to produce new supplies,’ Hofmeister said. ‘As a result, US production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.’

Oil company executives also said that while they continue to spend billions of dollars exploring alternative energy, Congress should not over-encourage this exploration to the point that oil and gas are discouraged.

‘We support incentives for alternatives, but taking one form of energy to encourage production of another will reduce the ability to keep up with growing US energy demand,’ said Robert Malone, chairman and president of BP (nyse: BP – news – people ) America. ‘This nation should be encouraging production of all forms of energy, especially oil and gas.’

They also warned that higher taxes on oil companies would only make it more difficult for companies to maintain the large investments needed to keep energy flowing to US consumers.

‘We urge you not to pass measures that have public appeal but would be counterproductive, such as tax increases that diminish our investment capabilities, reduce the attractiveness of high-cost domestic production, or disadvantage US oil and gas companies,’ said John Lowe (nyse: LOW –news – people ), executive vice president of ConocoPhillips (nyse: COP –news – people ).

‘When prices are high, the urge to point fingers at oil companies is strong,’ added Stephen Simon, senior vice president of Exxon Mobil (nyse: XOM– news – people ). ‘But undercutting the ability of American companies like ExxonMobil to compete in a huge global marketplace only makes it harder for Americans to secure the energy they need at competitive prices.’

Today’s Senate hearing, before the Senate Judiciary Committee, was aimed at exploring the high price of oil, which crossed 130 usd per barrel today. Committee Chairman Patrick Leahy of Vermont focused on the high salaries of US oil company executives and the high profits of these companies.

Democratic Senator Herb Kohl of Wisconsin also focused on high profits during the hearing, although many oil executives said their planned investment levels will exceed their annual profits.

Simon of Exxon Mobil added that profit margins of oil companies are now lower. Hofmeister of Shell also noted that while the absolute numbers used to describe oil company profitability are high, Shell in its most recent year made a profit of 6.9 pct of its revenues, which is a relatively normal return on investment.

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