Senate Alarmed Over "Failed" Oil Markets

Tells Oil Executives Laws Of Supply And Demand Do Not Explain Record Prices

(CBS/AP)  As the price of crude set another record in the trading pits, executives of the major oil companies were raked over the coals again in Congress, reports CBS News Business correspondent Anthony Mason.

Top executives of the five largest oil companies tried to shift anger over high prices to a debate over supplies Wednesday, leading a senator to accuse them of acting like "hapless victims" while racking up record profits.

Patrick Leahy, D-Vt., told the executives there's "a disconnect" between normal supply and demand and the skyrocketing price of oil - surpassing $130 a barrel even as the oil leaders testified - that the industry has yet to explain.

"We need to get prices under control.... We can only conclude that the oil markets have failed," said Sen. Herbert Kohl, D-Wis.

"My question is where does this end?" Sen. Sheldon Whitehouse, D-RI, asked Chevron Vice Chairman Peter Robertson.

Chevron made $18 billion last year, as gas prices soared.

"We have to explain to our family and friends what is going on," Robertson answered.

"How do you explain your profits?" asked Sen. Richard Durbin, D-Ill.

"I explain my profits by saying we invest it all," said Robertson.

"Oh, really?" Durbin said incredulously.

Exxonmobil made a $40 billion profit last year. But an executive claimed the company was only making 4 cents on the dollar.

"The point is its not profitability that's driving the price higher," said J. Stephen Simon, senior vice president of Exxonmobil.

Leahy asked Simon what his total compensation was at Exxon. Simon replied it was $12.5 million annually.

Two other executives, John Lowe, executive vice president of ConocoPhillips Co., said he didn't recall his total compensations as did Peter Robertson, vice chairman of Chevron Corp. John Hofmeister, president of Shell Oil Co., said his was "about $2.2 million" but was not among the top five salaries at his company's international parent. Robert Malone, chairman of BP America Inc., put his compensation at "in excess of $2 million."

Sen. Arlen Specter, R-Pa., said there was no explanation for "why profits have gone up so high when the consumer is suffering so much."

The five companies earned $36 billion in the first quarter of this year.

The executives, appearing under oath before the Senate Judiciary Committee, said they know high prices are hurting people, but they said the cause is not company profits but global supply and demand. And they sought to use their appearance before Congress to argue against new taxes on their industry

"I urge you to resist these punitive policies," said Hofmeister.

Senate Democrats recently announced an energy package that would tax "windfall" profits of the five companies. That might have public appeal, Lowe told the senators, but oil companies should not be viewed as "a scapegoat" for high prices.

That was not what many senators wanted to hear.

You have "just a litany of complaints that you're all just hapless victims of a system," Sen. Dianne Feinstein, D-Calif., told the executives. "Yet you rack up record profits ... quarter after quarter after quarter."

"I'm sorry to sound like a victim. I don't feel like a victim at all," replied Robertson of Chevron, saying that he was proud of his company's investments in future supply.

Sen. Richard Durbin, D-Ill, accused the corporate executives of ignoring the plight of people suffering because of high energy prices. "Where is your corporate conscience?" he asked them.

"The issue is simple," said Leahy. "People we represent are hurting, the companies you represent are profiting."

But some experts say big oil isn't entirely responsible for rising gas prices.

"The issue is: who's driving up the price? And it's not the oil companies," said Michael Masters, a hedge fund manager.

Masters blames it on a new class of speculators led by pension funds and university endowments, which are buying up huge amounts of oil, nearly 850 million barrels more a year than they did just 5 years ago. That nearly matches the growth in Chinese demand, which is often blamed for rising crude prices.

"We really feel like the price would be $50 or $60 lower if it wasn't for these investors' collective actions," Masters said.

The Saudis agreed last week to pump 300,000 more barrels a day.

"It will make no difference," says oil trader Ray Carbone.

Carbone says nothing is stopping the momentum.

"In your view we're only going higher?" asked Mason.

"Short of a global recession, there is not much to make the price of oil go back to the old time levels," Carbone said.

Oil prices are still so hot that one analyst has even forecast that crude could reach $200 a barrel within two years.
Two hundred dollar oil would push that price at the pump to more than seven dollars a gallon.

If that happens we're all going to need to drive an armored truck - full of cash, just for a fill up.

[forthepeopl1]

america gets 75 percent of its oil from canada,mexico

so explain to us why are we talking to opec?

[irliberal]

Wow... the republicans have done such a good job over the past 7 years... I love spending $4 a gallon for gasoline.

Oh, that was a teensy eensy bitty bit of sarcasm.

[omnibus66]

The fundamental laws of GREED and more GREED are at work here.

It is the duty of our government to take whatever lawful action that is necessary to protect its citizens. The uncontrolled greed of the oil companies is a far greater threat than terrorism or al-Quaeda.

The time has come to nationalize the oil resources we have in this country, and put a cap on oil profits.

Make no mistake, if something is not done, the Muslim States will destroy us without firing a shot.

[trillion1]

Big oil owns these clowns. This is just a dog and pony show. If it was an issue of supply and demand then why, when demand is going down in America, the prices keep going up.

[ici2i]

as oil prices rise and demand for biofuels increases, the price of food will soar even further. There will be rioting in teh street. But heck, forget about oil prices, why not a tax break for raising race horses in Kentucky among other GOP

[fiteit1]

Shell Oil Co. Chairman John Hofmeister said the prices can be explained, saying, "The fundamental laws of supply and demand are at work."

If you don''t supply me with money I will demand it.

[scalliwagrx8]

Let me see. The oil industry pulled the "shortage" scam in the 70''s. Enron pulled the "rolling blackout" scam in California more recently. So the energy industry has a reputation for scams.
I think we need to consider capital punishment in cases of where the crimes have a negative impact on our economy. Execute a few of these guys and see if the next ones want to play that game :)

[johnpatrick9]

The enemy is not Al Qaida but our own fellow corrupted, greedy, power mad fellow Americans who ship our jobs overseas for cheaper wages, rack up big profits for themselves, deny us medical coverage, lay us of every few years, don''t support our educational system and send our sons and now our daughters off to stupid wars to support their excesses in hubris all the while waving the flag in our faces and telling us what a great country we are in as long as it is great for them. We have become a Citizenry, dumbed down and reduced to Peasant status by our own Lords of the Land. Time for Jefferson''s call for Revolution to clean out the scum who infest the halls of our Capital AND are owned by the LOBBYIST.

[canyoutellme-2009]

it''s like talking to a brick wall in here.... the problem is *NOT* SUPPLY AND DEMAND!! I can''t believe the Oil Execs flat out said this and the gov''t is buying it! Unbelieveable. The problem is 2fold. 1 is the value of our dollar. FIX THAT. The OTHER problem is the BIGGEST One..... this problem is the OIL FUTURES TRADERS. They are the ones bidding up the price of oil. The price THEY bid it up to determines what the OIL companies can sell their OIL for. PERIOD!

The ONLY way to end this stupid rise in gas prices is to pass a new law... the law would be simply this...


For anyone to buy and sell OIL futures, they must do so PUBLICALLY. This means, their names are published when they buy and sell OIL FUTURES contracts and these lists can be made available to the public. THEN and ONLY THEN will you see them stop bidding up the price of oil thereby killing our economy.

Anyone onboard with that suggestion?

[mbcsmith]

No matter how little big oil supplies, they demand more money. Standard rule of Greed Over Principle, or G.O.P.


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Posted by dragonwagon5 at 01:11 PM : May 21, 2008



Gas was $1.60 a gallon when the LIBS took control of congress.

[mbcsmith]

Wow... the republicans have done such a good job over the past 7 years... I love spending $4 a gallon for gasoline.

Oh, that was a teensy eensy bitty bit of sarcasm.


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Posted by IRLiberal at 01:07 PM : May 21, 2008



Gas was $1.60 a gallon when the LIBS took control of Congress.

[mike71067]

"''Current up cycle,'' that''s a nice term," replied Leahy with sarcasm, "when people can''t afford to go to work" because gasoline is costing close to $4 a gallon.

The Dumbocrats are such idiots. It IS supply and demand. It''s that simple. If those idiots in Congress were serious about lowering gas prices, they would allow our oil companies to drill right here in the U.S., where we have tons of resources. But they won''t, because it''s not "environmentally friendly". **** them! The environmentalist movement can be blamed for most of this. If they would let us use the resources we have right here, gas would be much cheaoer.

[libh8er]

The US senate and congress are an embarrassment. A bunch of stiffassed lawyers who have NO IDEA that THEY ARE THE PROBLEM.

Thanks to democrats and environmentalist looney tunes, we''re now help hostage by OPEC.

And people wonder why I hate libs.

[mbcsmith]

If the LIB congress would allow drilling in Anwar, the Atlantic basin, the Pacific and gulf of Mexico we wouldn''t be here.
The LIBS have voted down applications for nuclear power as well.
Now, who''s going to fix it. Durbin, Leahy, Boxer? Do nothing LIB congress doesn''t deserve even an 18% approval.

[libh8er]

If they would let us use the resources we have right here, gas would be much cheaoer.
Posted by mike71067 at 03:32 PM : May 21, 2008

Exactly. Well said. Unfortunately, for imbeciles, it''s much easier to blame Ba-Ba-Ba-Bush and Ha-Ha-Ha Haliburtin. LOSERS!

[fstop100]

Just filled up my gas mileage was down 15%.
I think the oil companies have changed the blend to
give us worse mileage and increase demand.
And yes, they have the technology to do that!

[mexinvasion]

Durbin asked about their corporate conscience. They don''t have one.

[gopsoccermom]

LibH8er, why yes, Americans would want less for their oil than everyone else gets.

[gopsoccermom]

I just paid $930 for an ounce of gold. Its all the liberals fault! If they would just let the companies mine more gold in America we could be gold independant!

[bikerb54]

fiteit1, I agree with your statement: If you don''t SUPPLY me with money, I will DEMAND it.

Are these people so high up in their own little gas fume inducted nirvana that they can''t see what they are doing to our country??? Thought getting high was illegal! Oh wait, only if it''s not making the government money they can spend on their OWN dreams and forget the lower class. Middle class no longer exists, therefore, we are back in the Upper Class and Serfs era. I work to pay taxes and high gas prices so the wealthy don''t have to. Sorry, silly me.
I thought I was in the country of equality.

[bikerb54]

by the way, look closely at the photo at the beginning of this story. I seem to see a smirk on the face of one of the OIL AZZOLES-Bob Malone. Wonder if he has a brother named Neil. Oh wait they don''t do that, that''s what they have the consumers for,

[lvdragonlady-2009]

Congress needs to ask some better questions, like
1.show us where you are using these''profits'' to benefit the people and we want details not abstracts.
2.why are there not more refineries?
3.dare them to push the prices back to show their ''goodwill'' lol - *** that sounded good even though hell would freeze over before that happens.

[obamaslady]

Sen. Richard Durbin, D-Ill, accused the corporate executives of ignoring the plight of people suffering because of high energy prices. "Where is your corporate conscience?" he asked them.

WE HAVE ''NO CONSCIENCE'' WAS THEIR REPLY! We are living the good life so we just don''t give a d*mn!

[lilvinnyb]

LISTENING TO SOME OF THE PEOPLE ON THIS BOARD SHOWS JUST HOW INGORANT SOME ARE...AS THOUGH THERE ARE WEEKLY "RAISE OIL PRICE" MEETING WHERE THEY SIT AROUND AND RAISE PRICES.

BRAZIL WILL BECOME ONE OF THE TOP OIL EXPORTERS IN THE WORLD AFTER ONE OF THE LARGEST FINDS A COUPLE OF MONTHS AGO. EVEN MEXICO HAS FOUND NEW OIL FIELDS IN THE PAST YEAR. THE UNITED STATES IS THE ONLY COUNTRY NOT EXPLORING FOR NEW SOURCES OF OIL.

AUSTRALIA HAS BEEN DRILLING FOR 40 YEARS WITH NO ACCIDENTS. HURRICANE KATRINA DAMAGED 1000 WELL HEADS WITHOUT A SINGLE LEAK. THE LIBERALS HAVE A 1950''S MINDSET WITH OIL EXPLORATION AS THOUGH TECHNOLOGY HAS NOT GOTTEN BETTER.

THE PEOPLE RESPONSIBLE FOR HIGH GAS PRICES ARE THE VERY SAME PEOPLE DRILLING (NO PUN INTENDED) THE OIL EXECUTIVES.

THINK ABOUT IT YOU CLOWNS...YOU SUE OPEN FOR NOT RAISING PRODUCTION, BUT THEN CLAIM THAT HIGH PRICES ARE NOT CAUSED BY LACK OF SUPPLY IN THE MARKET...WHERES YOUR CONSISTENCY. YOU YELL AT OPEC FOR NOT DOING WHAT YOU W0NT ALLOW OUR OIL COMPANIES TO DO.

NO ONE HERE CAN EXPLAIN HOW TAXING THE COMPANIES WILL DECREASE GAX PRICES.

THOSE WHO VOTE FOR THESE PEOPLE DESERVE WHAT THEY GET.

[mbcsmith]

WE HAVE ''''NO CONSCIENCE'''' WAS THEIR REPLY! We are living the good life so we just don''''t give a d*mn!


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Posted by ObamasLady at 03:48 PM : May 21, 2008


The LIB senators seconded that remark and said polar bears are more important than food on American tables. Thay added" screw the little guy, we got ours"

[liberalme]

He asked Simon what his total compensation was at Exxon, a company that made $40 billion last year. Simon replied it was $12.5 million annually.


$12.5 million??? Pay this putz $8.00 an hour and make him buy gas for a year!

No one works hard enough to earn kind of money!

No matter what they say--they''re all a bunch of thieves!

[mbcsmith]

NO ONE HERE CAN EXPLAIN HOW TAXING THE COMPANIES WILL DECREASE GAX PRICES.

THOSE WHO VOTE FOR THESE PEOPLE DESERVE WHAT THEY GET.


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Posted by lilvinnyb at 03:50 PM : May 21, 2008


Well said! Instead of wasting more taxpayer money on this charade, the LIB congress should open up drilling in America! Screw polar bears.

[culturechang]

Oil markets are failing us.....not OPEC. By OPEC they are functioning exactly as inteneded. Why isn''t anyone addressing the real problem of dealing with OPEC under International law as an illegal price fixing organization?

[luvcomments]

bikerb54

People have for many, many decades been under the loony tunes misconception that anyone cares about any of us. Most of the legislature? Corporate conglomerates? We have to be joking to believe any of them care about anything but their own pockets - and their cronies. Propaganda. There may be a handful in legislature that do care, but not the majority by a long shot. We have the FDA in cohoots with the pharms, the FAA in cohoots with the airlines, and who knows what about the FCC and every other F agency. I say, face it, it''s time to nationalize the oil industry.

[johnt--2008]

The big oil companies can SAY their profits are not obscene, but we all know better. I wonder what profits of overseas companies are like? Gas costs a bigger fortune in Europe and the Far East.

[pollroller1]

Well I guess those senators gave those oil executives a good talking to. I heard one of them was so upset that he cried all the way to the bank.

[starleo146]

Just filled up my gas mileage was down 15%.
I think the oil companies have changed the blend to
give us worse mileage and increase demand.
And yes, they have the technology to do that!

Posted by fstop100 at 03:35 PM : May 21, 2008
+ report abuse

They are in bed with Bush and Cheney, why don''t they get the minutes of there behind the door conference 7 yrs ago,they refuse to give them up and we say okay? This mess is going crazy, wait till the dem''s start digging, prices will come down the whole lot should be in prison,He and the Saudi''s, there is a plan,sure to get rich off our backs. I want answers not a hearing to pacify me ANSWERS get them now judiciary committee, no more games, no more bull.

[bikerb54]

luvcomments, I agree. Where I live, we have ads telling us to by from companies who don''t use oil from abroad, they use American oil. Then why are their gas prices so high?

I hear people say to use mass transit. Well, by no choice of mine, I have to travel 45 minutes to work (one way) everyday because there are hardly any jobs that are not minimum wage. I own a very small home, my car is paid off, and I still have to work two jobs to make ends meet. One for my basic needs and one for the gas to earn the money to get those basic needs.

[canyoutellme-2009]

Just ask for the NAMES of the Oil Futures traders to be published on a PUBLIC list. THIS alone will stop the rise in the price of OIL and will IMMEDIATELY result in the decrease of the price of oil.

For those people''s names that show up on the list... find out WHO they work for. IF it is found out they work directly or indirectly for any of the oil companies, then you KNOW it''s the OIL COMPANIES who are actually drive up the price of OIL. But if you find out they are just stock brokers and futures brokers and joe schmoe from idaho, then there''s nothing you can do about it.

It really IS as simple as that. The price of oil is determined *ONLY* by those trading OIL futures. It has absolutely ZERO to do with supply and demand. We have PLENTY of supply right now. We have ZERO shortages anywhere in the US. And furthermore, if we have ZERO shortages in the US that means we have enough refineries already (which are NOT at 100% capacity btw) and there''s no need for OPEC to increase output. THe problem is SOLELY with those who are trading OIL futures. That''s it. Nothing else.

[shimy1984]

The simple solution to this entire mess is stepping up the development of alternative fuels.

It is 2008 and we are still using technology in cars from the 1930''s... honestly.. this is pathetic.

It is time for a new way of thinking.

[rudy654-2009]

Just look at those fat azzes! Claiming that because they can''t drill on federal lands, gas prices are up! Yeah? Well then tell us why you are making record profits if there is so little petroleum for you? Tell us what you are doing with the money Bush and Congress gave you in that big fat energy bill? Tell us what went on in your private meeting with Cheney?

They need to be sent to jail, everyone of them.

[randynason]

THESE OIL EXECS HAVE NOT BEEN REQUIRED TO PAY WINDFALL PROFIT TAX IN MANY YEARS. THEY CONTINUE TO RAKE HUGE QUARTERY PROFITS WHILE PRICES SOAR AND THE AVERAGE CONSUMER PAYS DEARLY.

[mbcsmith]

THESE OIL EXECS HAVE NOT BEEN REQUIRED TO PAY WINDFALL PROFIT TAX IN MANY YEARS. THEY CONTINUE TO RAKE HUGE QUARTERY PROFITS WHILE PRICES SOAR AND THE AVERAGE CONSUMER PAYS DEARLY.


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Posted by RandyNason at 04:08 PM : May 21, 2008



Please tell us EXACTLY how taxing them is going to lower the price of gas?

[walt1944-2009]

Congress called top executives from the BIG Oil companies to justify why their prices are so high.
Naturally, Congress got a variety of excuses none of which addressed the real issue.

The real issue was sitting right in front of the Congressmen/women, literally! If you added up the pay, bonuses, and other "perks" the BIG people have at BIG OIL, you probably would come close to the national debt!

How about these "BIG SHOTS" taking a BIG pay cut and passing it on to the consumer?

Unfortunately, as long as the Great Emperor Bush and the neocon Fascist Nazis are still running the government, as consumers will see more price gouging EVERYWHERE: A LOT MORE!!!!

SIG HEIL, BUSH!!!!
sig heil, DEFINITELY MORE OF THE SAME, McCain!!!!

[libh8er]

The guy from Shell really handed Leahy, D-Vt, his arse. I can''t believe Leahy is that stupid.

[rudy654-2009]

Posted by shimy1984 at 04:03 PM

Of course you are right. But you must also realize that the industry pretty much planned the zoning of our communities to be completely automobile dependent and a continual source of income for them. Notice the nearly autobahn roads that go through the suburban communities. Notice how far away from business centers, work places and schools everything has been located since the dawning of suburbia at Levittown.

[libh8er]

The LIB senators seconded that remark and said polar bears are more important than food on American tables. Thay added" screw the little guy, we got ours"
Posted by mbcsmith at 03:51 PM : May 21, 2008

Got that right!

[mbcsmith]

Unfortunately, as long as the Great Emperor Bush and the neocon Fascist Nazis are still running the government, as consumers will see more price gouging EVERYWHERE: A LOT MORE!!!!
Posted by walt1944 at 04:09 PM : May 21, 2008


A gallon of gas was $1.60 a gallon when the LIBS took control of congress.

[waterandsand]

Its not big oil thats causing $130 oil dumb f''s. Why do we keep blaming them.

[speakinup]

I''m not sure putting extra taxes on the oil companies will have the desired effect. Guess where the money will come from ?

Question: The profits the oil companies are making - how are they when compared to the other large companies ?

Question: Let''s assume for a minute it is speculation that is driving the prices up. What would cause those speculators to lose their shorts, and not gamble again ? How about more supply ? I mean after all the oil companies wouldn''t like that according to our knoweldgeable far left friends.

I say - let''s go for Shale oil in the short run (it would knock the **** out of Hugo and Iran''s sails) and then in twenty years or so go for the renewable energy in the long term after we have enough of them on-line.

[credibility2]

Things are out of hand and not getting any better. The consumer needs to take back the economy and show the profiteers who is really in charge. The US consumer presumably accounts for two-thirds of the economy, yet the other one-third is sticking it to the other two-thirds. We need a mass boycott for a day or two to throttle these egregious profiteers.

[rudy654-2009]

I''m surprised they didn''t claim executive privilege and refuse to testify.

[libh8er]

"We need to get prices under control.... We can only conclude that the oil markets have failed," said Sen. Herbert Kohl, D-Wis.

Actually, liberal democrats and enviro-wackos failed us all. It''s really that simple. What''s the ****** congress solution? Sue OPEC!!!! ROFL!!!!! What a bunch of lawyer d**kheads!!!!

[jerr11]

The Saudis got it right.

The high oil prices is due to the devalued US dollar.

It''s lost 40 percent of its value since Bush took office.

And why did it lose its value?

Because the neocons have been printing money and flooding the world with US dollars to pay for their endless Iraq war.


So when you pump your $4 a gallon gas today, give thanks to Bush and his Halliburton buddies.

We''re spending $12 billion a month in Iraq.

Guess where that money''s coming from.

From you!

[rudy654-2009]

One thing that would be major, and as good as a boycott, is to not travel this holiday weekend. Stay home and let them eat their gas.