There is a "growing suspicion that oil companies are taking unfair advantage," Sen. Pete Domenici, R-N.M., said, opening the hearing in a packed committee room.
"The oil companies owe the American people an explanation," he declared.
Lee Raymond, chairman of Exxon Mobil Corp., said he recognizes that high gasoline prices "have put a strain on Americans' household budgets" but he defended his company's huge profits, saying petroleum earnings "go up and down" from year to year.
Oil company heads also warned a tax on their windfall profits could hurt the oil supply, and rejected an idea of voluntarily giving money to help poor people heat their homes this winter, reports CBS News correspondent Bob Fuss (audio).
ExxonMobil, the worlds' largest privately owned oil company, earned nearly $10 billion in the third quarter. Raymond was joined at the witness table by the chief executives of Chevron Corp., ConocoPhillips, BPAmerica Inc., and Shell Oil Company.
Together the companies earned more than $25 billion in profits in the July-September quarter as the price of crude oil hit $70 a barrel and gasoline surged to record levels after the disruptions of Hurricanes Katrina and Rita.
Raymond said the profits are in line with other industries when earnings are compared to the industry's enormous revenues.
But senators pressed Raymond to explain why in the aftermath of Hurricane Katrina some ExxonMobil gas station operators complained the company had raised the wholesale price of its gas by 24 cents a gallon in 24 hours. Is that not price gouging? they asked.
Raymond said he could not confirm the specific price increase, but that ExxonMobil had issued a directive in response to the storm disruptions "to minimize the increase in price while at the same time recognizing if we kept the price too low we would quickly run out (of fuel) at the service stations."
"It was a tough balancing act," said Raymond, who said it was not price gouging.
Although only 28 states have price gouging laws, and they vary widely as to implementation, the head of the Federal Trade Commission cautioned against enactment of a federal price gouging law. "Price gouging laws that have the effect of controlling prices likely will do more harm than good" and would be difficult to enforce, FTC Chairman Deborah Platt Majoras told the hearing held jointly by the committees of energy and commerce.