Royal Dutch Shell Plc  .com Rotating Header Image

Big Oil and Lawmakers Spar Over Supplies

The Wall Street Journal Home Page

Big Oil and Lawmakers Spar Over Supplies

May 22, 2008; Page A3

WASHINGTON — As oil prices crossed $130 a barrel Wednesday, industry executives defended themselves against lawmakers blaming them for high prices, while asking senators to open access to domestic resources and reject tax increases.

Democrats have been largely unable to ease pressure on oil prices. Instead, they have focused the blame on the Organization of Petroleum Exporting Countries, speculation in the energy markets and companies such as Exxon Mobil,ConocoPhillipsRoyal Dutch ShellChevron Corp. and BP PLC.

Crude futures surged to a fourth straight record, up $4.19, or 3.3%, to $133.17 a barrel in New York. (Please see related articles on Page C1.) At the pump, meanwhile, the average national price of a gallon of regular gas rose 0.7 cent overnight to a record $3.807 a gallon, according to a survey of stations by AAA and the Oil Price Information Service.

Oil executives on Wednesday faced a hostile Senate Judiciary Committee asking why the publicly traded firms were making so much money and what they could do to lower prices.

“Does anybody here have a concern about what you’re doing to the American consumer?” asked Sen. Richard Durbin (D., Ill.), majority whip and a panel member. “Where is the corporate conscience?”

Sen. Patrick Leahy (D., Vt.), chairman of the panel, pointed out that the five oil firms had reported about $36 billion in the first quarter of the year.

Phil Flynn of Alaron Trading on the disappearance of Gulf coast crude oil and its knock-on effects. MarketWatch’s Steve Gelsi reports. (May 21)

“American consumers and the American economy have suffered … [and we] want to know how you can justify exorbitant profits on the backs of middle-class, hard-working families,” he said. “I would like to know, and I am sure American families and small businesses would like to know, why prices are so disconnected from what normal supply and demand would indicate.”

The oil officials said their profits compared to capital expenditures were in line with other industries and they were making about four cents on each dollar of gasoline. State and federal taxes account for about 15 cents a dollar of gas.

Several executives said the cost of producing a barrel of oil should be about $55 to $65 a barrel, if it were not for a weak dollar, geopolitical concerns about supply disruptions and speculation in the market. The companies instead called for Congress to open more exploration in the U.S. — a plea the Democratic majority has rejected.

“The problem of access can be solved in this country by the same government that has prohibited it,” said Shell’s head of U.S. operations, John Hofmeister. “Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development,” and should set a goal of producing an additional two million to three million barrels a day with additional access, he said.

“If we did this, it would be unnecessary for our national leaders to ask the rulers of other sovereign nations to produce more oil for U.S. consumers and risk the discomfort of an unresponsive reply,” Mr. Hofmeister told the committee.

If Congress did act to increase access — particularly in the Outer Continental Shelf and in Alaska’s Arctic National Wildlife Refuge — the executives said, that could help reverse the upward trend for long-dated futures contracts.

•  The News: Oil industry executives, defending themselves against blame for high fuel prices, asked lawmakers to open access to domestic resources.

•  The Numbers: Executives said the cost of producing a barrel of oil should be $55 to $65, if it weren’t for a weak dollar, geopolitical concerns about supply disruptions and market speculation.

Write to Ian Talley at [email protected] and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Big Oil and Lawmakers Spar Over Supplies”

Leave a Comment

%d bloggers like this: