Oil Profits Soar With Pump Prices

Exxon Profits Up, As Congress Tries To Tackle Election-Year Spike

(CBS/AP) 
"To support continued healthy growth of the economy, vigilance in regard to inflation is essential," said Bernanke, who delivered his most extensive thoughts on the economy in several months.

On Tuesday, Mr. Bush suspended filling of the nation's emergency oil reserve, urged the waiver of clean air rules to ease local gas shortages and called for the repeal of $2 billion in tax breaks for profit-heavy oil companies. He also urged lawmakers to expand tax breaks for the purchase of fuel-efficient hybrid automobiles.

Both Republicans and Democrats said they planned to support rescinding the $2 billion in tax breaks, which included subsidies for exploration in deep waters of the Gulf of Mexico and in geologically or politically difficult regions of the world, as well as royalty relief for certain oil and gas exploration. Executives of the major oil companies said at a recent hearing they do not need those tax breaks.

House and Senate conferees, as part of a broader tax package, were also considering a measure that would change accounting rules involving oil held in inventory, which would force the five biggest oil companies to pay an additional $4.3 million in taxes.

The industry and the White House oppose that measure, viewing it as a form of windfall profit tax that singles out five companies for accounting practices widely used in and out of the oil industry.

Republican leaders and tax writers said they hope to finish work on the broader tax bill this week, but it's not certain the oil inventory tax measure will survive.

In a letter to the IRS, Grassley and Baucus said the tax records of the major oil companies are needed to conduct "a comprehensive review" of the companies' compliance with tax laws.

"As pressure mounts to address extraordinarily high gas prices that consumers are facing at the pump, we feel we should better understand the federal tax posture of the industry," the two senators wrote IRS Commissioner Mark Everson.

In their request, the senators noted not only the industry profits, but "an extremely lucrative retirement plan by one oil and gas industry executive, benefits which may have been subsidized in part by the taxpayers."

The retirement compensation package given by Exxon Mobil Corp. to outgoing Chairman Lee Raymond is said to total $400 million when all pension payoffs and stock options are included.

Red Cavaney, president of the American Petroleum Institute told CBS News correspondent Byron Pitts Wednesday that the industry can’t lower their profits because they have a responsibility to their shareholders.

"All of the companies here in the U.S. that deal with the consumer are investor-owned companies. ... The responsibility of the management there is to insure that that they are providing for shareholder return."

And Rayola Dougher from the American Petroleum Institute told CBS News' The Early Show that oil companies are not to blame for rising prices at the pump. "I think it's really important to understand the forces at work here, that oil companies don't determine the price of crude oil, that we are part of an international marketplace and that price is determined every day by thousands and thousands of buyers and sellers on that marketplace," Dougher said.

But some states are taking action, planning their own investigations. Florida's attorney general Charlie Crist has launched a probe into prices at the pump.

"We're looking into the fact that these prices continue to go higher," Crist told The Early Show. "There's not any reasonable explanation for it. And what we're looking at is antitrust implications."

"When you don't have more choices for the consumer, when you don't have competition, which is the American way, the consumer gets hit, they get hurt, and that's what we've got to stop and that's what we're looking into," Crist said.