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Dorgan also announced his intention to
renew his effort to enact a windfall profits rebate7
for consumers. On May 03, 2006, the United States House of
Representatives passed a price gouging bill that would
penalize any oil company found guilty of price gouging with
penalties of upto US$ 150 million.
Exxon defended its high profits by saying that it was a
reasonable rate of return when compared to other industries
like banking, pharmaceuticals, and real estate. A full-page
ad in the New York Times on January 26, 2006, posted by the
American Petroleum Institute (API)8 contained a
chart that showed how many cents of profit various
industries made over the last five years for each dollar of
sales. While the oil and natural gas industry made 5.8 cents
per US$ of sales, banking industry made 17.3 cents per US$
of sales, pharmaceuticals made 16.2 cents per US$ of sales,
and real estate made 10.8 cents per US$ of sales. |
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According to Lee Raymond (Raymond), former Chairman and CEO of Exxon, these
criticisms of Exxon stemmed from a lack of understanding of the nature of
the oil industry. He said that a single quarter or a single year was not
that significant for the oil industry as it operated in terms of 10-, 20-,
30-, 40-year cycles. He felt that levying a windfall profits rebate on
energy companies would serve as a disincentive for investment in this
industry.
Raymond added, “Back in 1998, when prices went down to $10 (per barrel), I
don’t recall anyone in Washington calling me up and saying ‘what can we do
to help.’ But I didn’t want them to be calling up. That’s our job. We are in
that business. It’s our job to manage the risk. I am not interested in
hearing from (politicians) when prices are at $10 and I am not interested in
hearing from them when prices are at $40 or $50.” 9
More >>
[7] In November, 2005, Dorgan forced a U.S. Senate vote on a windfall
profits rebate plan. The plan applied only to the major integrated oil
companies, and would have imposed a 50% windfall profits tax on oil company
revenue derived from sales of oil at more than US$40 per barrel. Windfall
profits invested to boost domestic energy supplies would have been exempt
from the tax. Revenues collected by the tax would have been rebated to
consumers. The motion was defeated.
[8] The API is the main U.S. trade association for the oil and natural gas
industry, representing more than 400 members involved in all aspects of the
industry. It is involved in government relations on behalf of the American
oil and natural gas industries.
[9] Robert Campbell, “Former Exxon Boss: Critics ‘Don't Understand’ Oil,”
www.today.reuters.com, April 19, 2006.
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