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Oil Execs Grilled Over High Prices

Big Oil Wants $18 Billion in Tax Credits. Congress Asks: Is that Fair?

By SCOTT MAYEROWITZ

ABC NEWS Business Unit

April 1, 2008

Top executives of the nation's largest oil companies appeared before Congress today to explain why they should continue to get billions of dollars in tax breaks, given the current record high prices for oil and gas.

"On April Fool's Day, the biggest joke of all is being played on American families by big oil," said Rep. Edward Markey, D-Mass., chairman of the Select Committee on Energy Independence and Global Warming.

John Hofmeister, president, Shell Oil Company, acknowledged the pain people are feeling as they fill up their car tanks.

. "I heard what you are hearing," Hofmeister told the committee. " Americans are very worried about the rising price of energy -- the cost to fill their cars, as well as the cost to heat, cool and light their homes and businesses. These cost increases are hitting consumers hard, particularly the poor and those on fixed incomes."

Indeed, many Americans are struggling these days to fill up their cars with gas.

The average price of regular unleaded is now at $3.29 a gallon, a nominal record (the inflation-adjusted record gasoline price was $3.41 set in March 1981).

And prices are only expected to get higher.

The government is predicting prices to climb into the summer peak-driving season. Some parts of the country could easily see $4 a gallon.

At issue are $18 billion in tax breaks the oil companies are receiving over a 10-year period. The House voted last year and again in February to end those tax breaks and instead use the money to support wind, solar and other renewable energy sources. The measure has not passed the Senate and President Bush has promised a veto.

"Each week, Americans go to the gas pump and pay the cost for this administration's failed energy policy," Markey said.

But Hofmeister told the committee there are reasons for the high prices.

First, there is more demand for oil.

Hofmeister said the rate of growth in global demand for oil has accelerated in recent years, largely because of rapid economic growth and industrialization in countries like China and India.

And the oil that is out there is harder to get to. There are problems, Hofmeister said, such as "disturbances in the Niger delta." Other sources of oil are in more technically challenging areas that require more infrastructure.

Also figuring in is the massive consumption by American consumers.

The United States has 5 percent of the world's population but uses nearly 25 percent of the world's oil.

"Americans use 10,000 gallons of oil -- enough to fill a backyard swimming pool -- every second of every day," Hofmeister said. "Consumers -- and that means all of us -- must think more about our own energy footprints: when and how we drive, what we buy, how we work and the kind of world we want to create for coming generations."

To meet that demand, the oil companies said they needed to put their profits back into their infrastructure. For instance, this year, Hofmeister said, Shell will spend $28 billion to $29 billion on capital projects.

This is not the first time -- and probably not the last time -- that the oil executives appeared before Congress to defend their profits.

Their message again today was that the oil business has its ups and downs and that the billions of dollars of profits are needed to allow the industry to weather the down periods.

"Ours is a long-term business, with energy projects requiring enormous investments spanning decades that must carry us through both up and down cycles," said J.S. Simon, Exxon Mobil's senior vice president. "Imposing punitive taxes on American energy companies, which already pay record taxes, will discourage the sustained investments needed to continue safeguarding U.S. energy security."

John E. Lowe, executive vice president of exploration and production for ConocoPhillips, said that too often the oil companies face state and local government roadblocks that delay planned refinery expansions.

"In cases where infrastructure is clearly needed to serve the national interest, Congress should expedite federal and state permitting processes to ensure there is a balance between federal, state and local, and special interests," he said.

He also said that too many regulations, varying from state to state, about what grades of gasoline and what additives are allowed, contribute to higher prices because the oil companies lose out on economies of scale.

Peter J. Robertson, vice chairman of Chevron, said that while oil has gone up, so have many other commodities, such as gold, corn, copper, even coal.

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Statick (4/2/2008)
What a giganticwaste of time.

It's nothing but lip service by the politicians (on an election year, no less) to quell the sheep who don't understand supply and demand and want to find something to blame.

I think the main point is with Oil companies gaining record profits why on earth do they need government sponsored Tax Breaks. We are already paying through the nose for gas why should they keep getting tax breaks?

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swanlee (4/2/2008)
Statick (4/2/2008)
What a giganticwaste of time.

It's nothing but lip service by the politicians (on an election year, no less) to quell the sheep who don't understand supply and demand and want to find something to blame.

I think the main point is with Oil companies gaining record profits why on earth do they need government sponsored Tax Breaks. We are already paying through the nose for gas why should they keep getting tax breaks?

I'm all for doing away with the tax breaks, but I fully understand that the added cost to running their business will simply be passed down to the consumer. I'm not naive enough to believe otherwise.

Additionally, are "American families" actually struggling to fill up their gas tanks? Paying more for fuel does suck, but come on. I can't say I know of anyone who's actually struggling to buy gas.

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right you don't know of people struggling to buy gas. There are many that are.

origin8502 (4/2/2008)
swanlee (4/2/2008)
Statick (4/2/2008)
What a giganticwaste of time.

It's nothing but lip service by the politicians (on an election year, no less) to quell the sheep who don't understand supply and demand and want to find something to blame.

I think the main point is with Oil companies gaining record profits why on earth do they need government sponsored Tax Breaks. We are already paying through the nose for gas why should they keep getting tax breaks?

I'm all for doing away with the tax breaks, but I fully understand that the added cost to running their business will simply be passed down to the consumer. I'm not naive enough to believe otherwise.

Additionally, are "American families" actually struggling to fill up their gas tanks? Paying more for fuel does suck, but come on. I can't say I know of anyone who's actually struggling to buy gas.

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Eddie Jewell (4/2/2008)
right you don't know of people struggling to buy gas. There are many that are.

I can honestly say I don't know a single person who is struggling to buy gas for their vehicle. I do know plenty of people who are complaining about the cost, but when it comes right down to it nobody is leaving their car in the garage over the weekend. I still see plenty of SUVs and other gas hogs out on the roads on my short commute to the MARTA station.

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When it takes an average of 50-60$ now to fill up your tank it's not hard to see that it may cause some families to have issues with that, it could easily cost a normal family an extra couple of hundred dollars a month at least. Just because YOU personally don't know any families doesn't mean they are not out there.

Can anyone honestly argue that gas prices nearing 4$ a gallon are a good thing?

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origin8502 (4/2/2008)
Eddie Jewell (4/2/2008)
right you don't know of people struggling to buy gas. There are many that are.

I can honestly say I don't know a single person who is struggling to buy gas for their vehicle. I do know plenty of people who are complaining about the cost, but when it comes right down to it nobody is leaving their car in the garage over the weekend. I still see plenty of SUVs and other gas hogs out on the roads on my short commute to the MARTA station.

You're just wrong. *Raises hand*  It's boring as he.ll sitting at home all weekend, but my family has had to cut out many extras (not SOLELY because of gas prices, but it's a huge part of it) because we have to budget for paying for gas.  Buying more generic brand groceries.  Check.  Driving mostly only to work or the store.  Check.  Less dining out and more taking lunch to work.  Check.  You're naive if you don't believe this is happening in many American homes all across the country. 

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origin8502 (4/2/2008)
Eddie Jewell (4/2/2008)
right you don't know of people struggling to buy gas. There are many that are.

I can honestly say I don't know a single person who is struggling to buy gas for their vehicle. I do know plenty of people who are complaining about the cost, but when it comes right down to it nobody is leaving their car in the garage over the weekend. I still see plenty of SUVs and other gas hogs out on the roads on my short commute to the MARTA station.

I got out much less often than I used to.....much less.

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I will talk about me. It takes me $125.00 to fill up my truck. I work 45 miles from my job. I use to fill up 5 times a month. April 17 will be my 1 year anniversary on Douglas county van 62. Now I fill up 2 times a month and the wear and tear on my truck is minimal. It is rough for me I have changed my habits and when I take rides they are for a purpose. Not to joy ride. Some can say they see people with gas hogs but not too many people are going to sell a truck that a dealer can't get rid of or lose money on to buy a hybrid that costs over 25K and you are uncertain what the back end costs are. Folks are penny pinching. Might not be you, but me I have to.

Before you bastids say sell your truck, f' you it is paid off and I don't want a car note. My truck is good to get me 500,000 miles and I plan on getting every mile out of it. Plus it still has Vic on it. ha ha. :D

origin8502 (4/2/2008)
Eddie Jewell (4/2/2008)
right you don't know of people struggling to buy gas. There are many that are.

I can honestly say I don't know a single person who is struggling to buy gas for their vehicle. I do know plenty of people who are complaining about the cost, but when it comes right down to it nobody is leaving their car in the garage over the weekend. I still see plenty of SUVs and other gas hogs out on the roads on my short commute to the MARTA station.

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swanlee (4/2/2008)
When it takes an average of 50-60$ now to fill up your tank it's not hard to see that it may cause some families to have issues with that, it could easily cost a normal family an extra couple of hundred dollars a month at least. Just because YOU personally don't know any families doesn't mean they are not out there.

Can anyone honestly argue that gas prices nearing 4$ a gallon are a good thing?

Well, on it's surface, it would seem it be a hardship for at least some, but I have YET to encounter anyone else besides me that drives the speed limit and drives sensibly. Both are factors in reducing consumption. Are people that dumb that they do not know slowing down will save gas? Or maybe no one is suffering financial hardships from higher gas prices, because if they were, they would slow the **** down.

I will argue that $4 for a gallon of gas is a good thing. It will steer us to more energy efficiency, and away from dependency on foreign oil.

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swanlee (4/2/2008)
When it takes an average of 50-60$ now to fill up your tank it's not hard to see that it may cause some families to have issues with that, it could easily cost a normal family an extra couple of hundred dollars a month at least. Just because YOU personally don't know any families doesn't mean they are not out there.

Can anyone honestly argue that gas prices nearing 4$ a gallon are a good thing?

Just a slightly good thing:  Every person in this country who has retirement funds, ie 401k or IRAs, has oil company stocks in there.  So when the oil companies' money comes in, those funds see increases.

 

Like I said, it's a slightly good thing.

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falconfoozball (4/2/2008)
origin8502 (4/2/2008)
Eddie Jewell (4/2/2008)
right you don't know of people struggling to buy gas. There are many that are.

I can honestly say I don't know a single person who is struggling to buy gas for their vehicle. I do know plenty of people who are complaining about the cost, but when it comes right down to it nobody is leaving their car in the garage over the weekend. I still see plenty of SUVs and other gas hogs out on the roads on my short commute to the MARTA station.

You're just wrong. *Raises hand* It's boring as he.ll sitting at home all weekend, but my family has had to cut out many extras (not SOLELY because of gas prices, but it's a huge part of it) because we have to budget for paying for gas. Buying more generic brand groceries. Check. Driving mostly only to work or the store. Check. Less dining out and more taking lunch to work. Check. You're naive if you don't believe this is happening in many American homes all across the country.

I'm glad you and Dhug are doing your part to cut down your intake. My main beef with the article and the Congressman's statement is that it reads to me like a majority of American families are downright suffering because of the current gas prices. I look to the European nations by comparison and gas has ALWAYS been exceedingly more expensive than ANYWHERE here in the States including present day. We've had it and still have it good by far in comparison. I say I've never had to struggle to fill my tank precisely because I've always made the necessary adjustments (trade in a 20 MPG vehicle for a 37 MPG vehicle, take MARTA, etc.) over the years as has pretty much everyone else in this country. Consumption of gasoline and vehicle ownership has not steadily declined with increase of gasoline over the decades; quite the opposite actually. To me, "struggle" must have a more serious definition than what is generally being applied in this case. The most applicable definition I could find is: fight: make a strenuous or labored effort; "She struggled for years to survive without welfare"; "He fought for breath". That doesn't seem to fit the current situation from my perspective anyway.

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prolikewhoa (4/2/2008)
octoslash (4/2/2008)
Grilling oil execs during an election year.

What will they think of next?

Should we do it now or later? Maybe we should wait a few years then.

Sarcasm....that's original.  But since you asked....

Actually, it shouldn't be done at all. 

Go read The Constitution Of The United States, and then come back and cite for us the amendment that gives Congress the authority to interfere with a private company's free market commerce.  

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Europe doesn't have the pizz-poor infrastructure planning that we do, nor the vast geographical openness. People in Europe aren't driving 50 miles each way to work and living in the sticks miles away from shopping. Their cities also have better-managed and better-designed public transit. The so-called "American way of life" right now is absolutely DEPENDENT on cheap oil and gas.

(Also, Europeans have those little gay cars that get like 60 MPG.)

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Eddie Jewell (4/2/2008)
I will talk about me. It takes me $125.00 to fill up my truck. I work 45 miles from my job. I use to fill up 5 times a month. April 17 will be my 1 year anniversary on Douglas county van 62. Now I fill up 2 times a month and the wear and tear on my truck is minimal. It is rough for me I have changed my habits and when I take rides they are for a purpose. Not to joy ride. Some can say they see people with gas hogs but not too many people are going to sell a truck that a dealer can't get rid of or lose money on to buy a hybrid that costs over 25K and you are uncertain what the back end costs are. Folks are penny pinching. Might not be you, but me I have to.

Before you bastids say sell your truck, f' you it is paid off and I don't want a car note. My truck is good to get me 500,000 miles and I plan on getting every mile out of it. Plus it still has Vic on it. ha ha. :D

origin8502 (4/2/2008)
Eddie Jewell (4/2/2008)
right you don't know of people struggling to buy gas. There are many that are.

I can honestly say I don't know a single person who is struggling to buy gas for their vehicle. I do know plenty of people who are complaining about the cost, but when it comes right down to it nobody is leaving their car in the garage over the weekend. I still see plenty of SUVs and other gas hogs out on the roads on my short commute to the MARTA station.

I'm certainly not saying I'm not penny pinching. I'm not made of money either, but I AM making conscientious decisions about my budget and I have definitely factored in the rising cost of gasoline. I can't frivolously spend money on non-necessary items/goods like I could in the past, but that doesn't mean I'm struggling to buy gas. It's a decision: buy unnecessary item A or save it to buy necessary item B. Simple as that.

Hybrids are not the only way to get better MPG. I have a Honda Civic VP (that would be the value line with 4 doors) that gets upwards of 38 MPG interstate and 34 MPG city; it cost $12000.

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morphy (4/2/2008)
The profit margin made by oil companies on a gallon of gas pales in comparison to the amount of money that the government makes off of it in taxes.

And the politicians are grilling the oil executives??

 

You're peeing into a stiff wind, morphy. 

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