Big Oil Once Again Abused by Congress

Once again as prices at the pump skyrocket, big oil executives had to defend themselves against critics in Congress. These hearings aren’t a surprise though. Every time gasoline prices make a big move to the upside Congress howls in anger pointing the finger at an “Oil Company Conspiracy”. Of course any rationally minded human being would know gasoline and oil were all publicly traded commodities as is heating oil and natural gas.

One would think the Chairman of the House Select Committee on Energy Independence and Global Warming would have some insightful remarks to dispute the “evil oil company” claims, unless, of course, the one making the most foolish remarks was the Chairman himself. Rep. Ed Markey of Massachusetts demanded, “The American people deserve answers and it is time for Big Oil to go on the record about these record prices.”

“Given that the largest contributor to the cost of gasoline is crude oil, this has translated into record-high gasoline prices,” Peter Robertson, vice chairman of Chevron (CVX) said.

He also wanted to know why big oil hadn’t put more money into alternative energies. Perhaps it didn’t cross his mind that he was questioning “Big Oil” hence the word “oil”. Maybe he should ask executives at Pfizer (PFE) why they aren’t putting more money into Vitamins or why Exxon (XOM) pays more taxes to the US Government then they have US revenue.

Why not ask why we push fuels with negative energy yields such as ethanol and hydrogen which do even more damage to the environment than the usage of gasoline? As someone who should have vast knowledge on the subject of the oil industry as well as alternative fuels and their contributions to pollution or lack thereof, these questions are nothing but disturbing as they show the lack of competence in Congress to one of the largest issues to not only the United States but the world.

Comments

[User 120124]

Interesting comments.

I agree the problem is competence with Congress in acting in our best interests.

[Tom B]

You sound like you have a chip on your shoulder. Given that oil is pumped out the ground, the best solution would probably be simply to nationalize our oil resources, but I expect that smacks too much of socialism to some people. Really, it's just common sense.

[JoshG]

Currently US based oil has only 2% of the worlds oil resources yet already provides 8% of the worlds oil supply. The majority of the this remainder is owned by foreign countries. Any genius can figure out that we are already pumping 4X faster thant he rest of the world.

These skrocketing oil prices are not gouging by others. Its the decline of our dollar. Which is buying less and less every day as the Feds churn more and more money to pay a balooning deficit.

[sammy]

Supposedly, our illustrious Congress knows just about everything knowable about all things worth knowing. For you to imply anything to the contrary is blasphemous! Go for it! I wish you success!.

[Ronmac]

To poster Barta, are you for real? Look at what has or is happening to Mexico with them taking 80 percent of Pemex's production. Production is declining rapidly and they had no clue and no capital to reverse it. And that is the type of scenario you would put into place here. Gasoline may be getting more expensive, but (newsflash), it is getting more expensive and hard to find. How do you justify stealing (excuse me nationalizing) private property?

[Tom B]

"How do you justify stealing (excuse me nationalizing) private property?"

Lots of oil production is on public lands. How would nationalization be stealing?

"These skrocketing oil prices are not gouging by others. Its the decline of our dollar. "

Sadly, the weak dollar is a HUMONGOUS problem. It's killing me.

[Ronmac]

To poster Barta, so instead of leasing the public minerals to private companies, you would instead have the Federal government keep the leases, drill and produce them? You have a lot more faith in the government than I do. Not sure who they would call up in front of Congress and berate for high prices and low supply. Government involvement isn't going to change that reality. Again, I point to Mexico and Pemex as a very good example.

[ponchovilla]

Congress vs Big Oil, "As Seen on TV" is the equivalent of a professional wrestling match. Very entertaining.

[ElliotMiller]

It's bad enough that we are going to have the same type of bureaucrats who generate long lines at the DMV also provide us with health care, but if we entrust the government to undertake the complexities of running an E & P operation we'll all freeze and our cars will remain on empty.

[NI123]

Well.... It COULD be argued that the oil companies are intentionally holding back exploration to keep the prices high, but I doubt it. One thing I know for sure is that their tax breaks were put in place in the 80's when many were going bankrupt. Those tax breaks are certainly no longer necessary, and should be rescinded.

[AmesTiedeman]

The Socialists in Washington never met a profit they liked unless 100% of it went to them to waste!

We need to cut the Federal Budget in half. That's right, by 50%

[mixter]

The reason we have so many idiots in Congress is that we have a bunch of idiot voters.

[mixter]

Thomas Barta is a real genius. Why he is so smart that he knows our stupid government has all of the answers. Just look at Venezuela, their nationalized oil company is now producing close to a third less than it was when Chevez started giving orders, and nationalizing the private oil operations.

Tell you what Thomas, you go ahead and vote for the "dim-wit-o-craps&... and your grandchildren will hold you in scorn for what you left them to contend with. I'll bet you voted for Jimmy Carter!

[2old2care]

Mixter: "dim-wit-o-craps&... You must mean 'dim-wit' as in Republicans the past 7 years - and 'o-craps' as in Democrats the past 7 years also.

Point being, a Politician is a Politician looking for votes and money and nothing more. IMO each (with rare exception) of them care not a figleaf for the folks that vote - only that they vote 'for me'.

And that's why they yell at Big Oil Company Reps in these "hearings". Each hopes to win a few 'more' votes from folks that don't know better.

[oilprofits]

Hmmm, looks like nobody cares to question how come oil companies' profits have gone up 30% per year over the past 5 years without increasing their output significantly. Let's stop blaming middle east alone for the prices at the pump. By the way who is benefiting the most because of the increased oil prices in US? If congress does not question the oil companies, who else will? Of late solar and wind are as cheap as oil, why are we not giving as much incentives for these as we give to oil companies?

[sopocistudio]

oilprofits...a point to ponder re: solar and wind being as "cheap" as oil. Granted, efficiencies HAVE been made in the production of solar cells/films, etc, as well as more efficient turbines, lowering costs somewhat, but its the higher price of oil that has made alternative energy "price competitive". Regarding tax incentives for oil, if memory serves, isn't the "delpletion allowance" a big part of that? After, all, every barrel that gets pumped, means there's a barrel less left to pump, eventually causing the oil to go dry. So like, what?...maybe in 20-50 years the sun's going to stop shining, or the wind will stop blowing? So alt. energy needs such an "incentive"?

[rickh]

Dear Mixter,

Chavez is pumping 30% as much oil? He is getting four times as much money for it. I guess he is smarter than you.

[angelom]

here's a plot worth considering: with peak oil widely acknowleged and Chindians moving into middle-class status buying cars, the demand for oil/gasoline is rapidly pushing prices upwards. Since US Big Oil has less control over P/O dynamics, they might focus on trying to "delay" the Chindian move into automobile ownership. How? Buy helping OPEC push up prices [not necessarily in collaboration] so as to "squeeze" Chindian demand at the pump. Why? To allow more oil/gasoline for the US consumer who can bear higher prices without consumption pullbacks like the Chindians are likely to do as gasoline approaches $4-$5.00/gal. This scenario only has short-term effects, 5-10 years, at best.

[enviro111]

Perhaps we can nationalize Barta's home from him. It wouldn't be 'stealing' would it. Give it to a nice deserving family who is losing their home to a foreclosure.

When private property rights are abused by the government the entire society goes to hell quick. I suspect Robert Mugabe is Barta's mentor. Barta if you like nationalization of assets and lots of government control move to your paradise Zimbabwe.

[scrapiron]

Good article overall but there is some misinformation in it that all should know about. The debate about ethanol ended several years ago. Everyone that invested enough time found that big oil had hired some "consultants"... to study ethanol production and use and they determined that ethanol was energy negative and its use would result in more carbon emmissions and higher food prices. Problem is, many more real consultants found the opposite. Thus most people stopped saying such bad things about ethanol about 5 years ago. For example, the blather about rising feed prices. Distillers grain is what's left over after fermentation. Its feed value is more after the process than before. Thus ethanol production lowers feed production costs - etc for all those other lies.

[AmesTiedeman]

Great piece!

[doogerdpp]

the govt makes much more off a gallon then do the oil company does.When will congress get off their a$$es and let us develop our own reserves

[kongpawn]

While I do not agree that we should nationalize oil reserves, it appears that the issue that is always used by the oil companies is that there is not enough refining facilities.

Why then doesn't our government place our money into refining facilities and compete against the ones who say they can't build them fast enough. I bet that will change the playing field.

[norcaliron]

Big oil started selling off refineries over 10 years ago. Because of low average total returns world wide. And high costs of dealing with the goverment, you will do this orders and fines, the public, not in my back yard, and green groups of the public and goverment. Big oil then centered on drilling for oil. More profits and less demands from goverment and public. Most of big oils refineries that are left are because they could not find a buyer. This was not just the US. It was world wide.

[CanuckInvestor]

I like the article. But what congress should have been asking is why has big oil done so little frontier, high-impact exploration in the last 20 years. The oil majors are minnows in terms of their ability to affect the price of crude but if they could put some effort into finding elephant fields they might be able to have an impact. While there probably aren't too many giants left to find, the world is a big place and some areas outside of North America have potential. Big Oil's approach to adding reserves has been scan the stock tables for a takeover candidate and that becomes a zero sum game with no effect on the world oil supply.

[EricSchleien]

Re: Ethanol

Ethanol is inappropriate and irresponsible to use. The return on energy invested is downright awful and it's horrible for the enviroment as fossil fuels still pollute the air. It's also not appropriate to have a countries energy supply compete with their food supplies. We simply do not have enough farmland to support our population.

RE: Canuck Investor

Many oil companies are struggling to maintain their reserves. Nationalized oil companies such as the one in Saudi Arabia have done an awful job letting excess water into the oil fields and letting much natural gas escape which is wasted energy. It's the same reason Pfizer won't put lots of money into super high risk drugs -- that's left to the small pharma firms. The E&P firms as a whole are in a more risky and volatile business as their success relies on finding new reserves and for the very micro-cap firms finding oil in the ground at all. If there was a monetary incentive the oil companies would do it. The facts are yields have gone down on oil fields and it takes more and more money and is harder and harder to pump oil out of the ground. The "gusher" is hard to find these days as we now need to force out heavy crude compared to the easy to find light sweet crude.

RE: Nationalizing Reserves

Mexico and Venezuela were cited. Also note Saudi Arabia.

[Silver-Bullet]

Get rid of the ethonol initiative.

To counter ever increasing prices, do not hold on to the US$. Hold on to real money - Gold and silver!!!

Think about it, an ounce of gold bought about 10 barrels of oil in 1998. The same 1 once buys about 10 barrels of oil today (2008) too!!!