[Mb-civic] Profits, Prices Spur Oil Outrage - Washington Post

[William Swiggard]

Profits, Prices Spur Oil Outrage
Exxon Mobil Posts First-Quarter Rise

By Steven Mufson and Shailagh Murray
Washington Post Staff Writers
Friday, April 28, 2006; A01

Exxon Mobil Corp. 
<http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=XOM&nav=el> 
reported $8.4 billion in first-quarter profit yesterday, as members of 
Congress outraged over high gasoline prices hastened to propose measures 
that would boost taxes on oil firms, open new areas to drilling and 
provide rebates to taxpayers but would not necessarily alter prices at 
the pumps.

The earnings outstripped the oil giant's profit in the first quarter of 
last year. Given current oil market conditions, analysts said, that puts 
Exxon Mobil on track to break the $36 billion record profit it made last 
year.

Meanwhile, President Bush sought to show that he was responding to calls 
for action in the face of rising gasoline prices. While visiting a 
gasoline station in Biloxi, Miss., Bush renewed his call for Congress to 
give him the authority to "raise" mileage standards for all passenger 
cars. White House officials said later, however, that they didn't know 
when or how the president would use that authority.

Congress has the authority to approve changes in mileage standards for 
passenger cars, and the executive branch can set them for light trucks 
without approval from Congress. But neither Congress nor the 
administration has shown much interest in raising passenger car 
standards, which were set in the 1970s and haven't changed since 1985. 
In March, the Bush administration said it would raise average fuel 
economy standards by 1.9 miles a gallon for sport-utility vehicles, 
pickups and vans for models in 2008 through 2011, a long-awaited move 
that environmentalists said was too modest.

In Congress, anger over gasoline prices brought action in the Senate to 
a screeching halt yesterday, with Democrats interrupting debate over an 
emergency military spending bill to protest a key oil company subsidy. 
In a highly unusual move, Sen. Ron Wyden (D-Ore.) waged a solo 
filibuster on the Senate floor in an attempt to force a vote on a 
provision that would halt support for what Wyden said was about $35 
billion for oil and gas companies. "This is the big one, folks, in terms 
of energy subsidies," Wyden said during the five-hour standoff. "This is 
the one where there is no logical case . . . when oil is $70 per barrel."

Various committees and individual lawmakers scrambled to offer relief to 
consumers, punish suppliers and promote favorite energy-related 
provisions, most of them offering little or no immediate relief at the 
gas station pumps.

Senate GOP leaders rolled out a fat package of energy measures, 
including a $100 rebate to most taxpayers, and reaffirmed authority for 
state and federal officials to fight price gouging. The proposal also 
would allow drilling in the Arctic National Wildlife Refuge in Alaska; 
Democrats called the controversial idea a deal-killer for the rest of 
the package.

Democrats unveiled their own ideas, including various windfall-profit 
rebates, a temporary suspension of the federal gas tax and alternative 
energy investments.

For all the criticism from Congress, Exxon Mobil's earnings fell 
slightly short of analysts' expectations, and company shares fell 68 
cents to close at $62.42 a share.

In an attempt to simultaneously impress investors and calm politicians, 
Exxon Mobil spokesman Ken Cohen stressed that compared with the 
year-earlier quarter, the company had increased its worldwide oil and 
gas production by 5 percent, boosted capital spending by 41 percent and 
paid worldwide taxes that amounted to a 46 percent rate.

But analysts, while impressed by the production numbers, noted that much 
of the increase in capital spending came from sharply rising costs for 
oil services and that the high tax rates were a result of high crude oil 
prices. In many countries, sliding-scale tax rates rise as prices do; 
Norway taxes some portion of output at rates as high as 70 percent, and 
Libya's effective tax rates can go as high as 90 percent, analysts said.

Exxon also said it spent $5 billion buying back its own shares, more 
than the $4.1 billion spent on exploration and production. The company 
said it expected to spend $6 billion repurchasing its own shares in each 
of the remaining quarters this year.

Wall Street analysts discounted the likelihood of congressional action 
against oil companies. "As someone in the industry for more than 25 
years, I've seen it before," said Fadel Gheit, an oil company analyst at 
Oppenheimer & Co. "Penalizing oil companies does not lower prices at the 
pump. If we have a windfall profits tax, it will just create another 
moneybag for the government. It will not increase oil production by one 
barrel. It will not lower gasoline prices by one cent or alter our 
dependence on OPEC countries."

Federal Reserve Chairman Ben S. Bernanke also cautioned Congress on the 
various proposals being floated. In response to a question at a hearing 
of the Joint Economic Committee, Bernanke said, "Unfortunately, after 
many years of not really doing as much as we should on the energy front, 
this situation has arisen. And I don't see any way to make a marked 
impact on it in the very short run."

Bernanke said a windfall profits tax would reduce incentives for 
companies. "What we need to do," he said, "is think about whether there 
are actions we can take that over at least a number of years will put us 
on a more secure footing."

And he added, "I would like to let the market system work as much as 
possible to generate new supplies, both of oil but also of alternatives, 
and for the prices, painful as they may be, to help generate more 
conservation and alternative uses of energy on the demand side."

While many of the proposals in Congress are familiar, costly and 
unlikely to be enacted, bipartisan political pressure for action could 
result in tougher scrutiny and possible sanctions against the oil 
industry -- until recently one of the closest allies of the Bush 
administration and the Republican-led Congress

The Senate Finance Committee, for instance, requested federal income tax 
returns for the past five years from the 15 largest oil and gas 
companies, based on sales, in what could amount to a congressional 
audit. "We're seeing record profits and significant executive 
compensation in the oil and gas industry," said Finance Committee 
Chairman Charles E. Grassley (R-Iowa). "I want to make sure the oil 
companies aren't taking a speed pass by the tax man."

The Senate Judiciary Committee unanimously voted to allow the Justice 
Department to prosecute countries that belong to the Organization of 
Petroleum Exporting Countries for price fixing in violation of U.S. 
antitrust laws. "What you have today is an oligopoly, effectively, and I 
think it's a disaster for the American people," said Sen. Dianne 
Feinstein (D-Calif.), a member of the panel.

Judiciary Committee Chairman Arlen Specter (R-Pa.) said GOP leaders had 
assured him they were eager to push the legislation to the floor, 
pointing out the political pressure -- including a series of Democratic 
news conferences held in recent days at Capitol area gas stations.

http://www.washingtonpost.com/wp-dyn/content/article/2006/04/27/AR2006042700534.html?referrer=email
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