Congress looking to stem anger at the pump
POSTED: 9:12 p.m. EDT, June 13, 2007

WASHINGTON (AP) -- As motorists face near record gasoline prices, the Senate took up an energy bill Tuesday that would raise auto fuel economy standards for the first time in nearly 20 years and make oil industry price gouging a federal crime.

Democratic leaders in both the Senate and House said they want broad energy legislation passed before the Fourth of July congressional recess, hoping to dampen growing voter anger over paying more than $3 a gallon at gasoline pumps across the country.

The Senate bill urges automakers to boost their fuel economy to a fleet average of 35 miles per gallon by 2020, about a 40 percent increase over what new cars and the less fuel efficient SUVs and pickup trucks are required to attain today. The auto standard of 27.5 mpg was last increased 18 years ago. SUVS and small trucks must achieve a fleet average of 22.2 mpg.

Majority Leader Harry Reid, D-Nevada, said Tuesday the bill would help reduce the country's reliance on oil -- an addiction that consumes more than 21 million barrels a day, nearly two-thirds of it imported.

The White House issued a statement opposing many of the bill's most critical parts, including the mandatory increase in automobile fuel economy. It also said President Bush would be urged to veto the legislation if it contained the price-gouging language.

Reid has called the auto fuel-efficiency measure, known as CAFE, the energy package's most contentious issue.

Carmakers have doubts

Executives of General Motors, Ford and Chrysler called on Senate leaders last week arguing that the Senate bill's requirements may not be achievable. Sen. Carl Levin, D-Michigan, is working on a more modest fuel economy proposal that he says automakers believe they can meet.

"The handwriting has been on the wall for a long time," said Sen. Dianne Feinstein, D-California, a long time advocate for more stringent auto fuel-economy requirements. She said numerous studies have shown manufacturers can meet CAFE increases more stringent than those being considered by the Senate.

The Senate bill, which faces numerous hurdles over the next two weeks, also would sharply ramp up the use of ethanol as a substitute for gasoline, requiring production of 36 billion gallons of ethanol a year by 2022, five times today's production.

While the additional ethanol initially would come from corn, eventually nearly two-thirds of it is expected to be produced from prairie grasses, wood chips and other cellulosic sources.

Many of the bill's provisions have bipartisan support, but Republicans want more, especially more domestic production of oil, natural gas and coal as well as expansion of nuclear power.

The Democratic bill "doesn't do anything to address expanding domestic (energy) production, and it won't do a single solitary thing to reduce gas prices," said Minority Leader Mitch McConnell, R-Kentucky.

But Sen. Maria Cantwell, D-Washington, said a price-gouging provision she is advocating may reduce the prospects of future price spikes.

It would give the Federal Trade Commission broader authority to investigate possible wholesale oil market manipulation -- from the legitimacy of refinery shutdowns to whether gasoline is being exported to limit domestic supplies.

Price-gouging provision contentious

For the first time, it would be a federal crime to charge "unconscionably excessive" prices for petroleum products at the wholesale or retail level. Critics of the provisions, including the Bush administration, said the measure amounts to price regulation and could lead to supply shortages.

"The federal government has all the legal tools necessary to address price gouging," said the White House.

The oil industry has repeatedly argued that many investigations have failed to uncover price fixing by oil companies. "If there is no manipulation, there should be no fear of a strong federal statute," Cantwell countered at a news conference Tuesday.

Sen. Larry Craig, R-Idaho, called the price-gouging provision "a feel-good vote" that he probably would support. "But does it bring gas prices down? Probably not," he said.

Craig said he supports much of the bill, including the increase in auto fuel-economy requirements, but he called it "a domestic green energy bill" that doesn't address the need for more domestic energy production.

He said Republicans -- along with support from some Democrats -- will renew the drive to open new areas of coastal waters, especially the Eastern Gulf of Mexico and central Atlantic region, to oil and gas development. One proposal to give states an ability to get out from under a federal ban on offshore oil and gas development has bipartisan support, but is strongly opposed by a number of senators from coastal states.

To reinforce lawmakers' concerns about reliance on imported oil, the Senate late Tuesday added a provision to the bill that requires the president to establish policies that cut petroleum use by 10 million barrels a day by 2031. Opponents of the bill said it's not needed because other provisions in the bill already would accomplish reductions in oil demand. Still, the amendment offered by Sen. Evan Bayh, D-Indiana, was approved 63-30.

Another highly contentious issue senators will debate is whether to require utilities to use more renewable fuels to produce electricity.

Sen. Jeff Bingaman, D-New Mexico, intends to propose a national requirement that 15 percent of a utility's power come from renewables such as wind and solar power. Such a requirement is strongly opposed by utilities in the Southeast where there are few resources of wind power and heavy reliance on coal.

Isn't price gouging already a crime?

In some places it is not.

I don't know all the details, but there are federal laws that cover certain things, and state laws that cover others, and there are gaps in some places. I know there was an issue last year about something that it is a crime in 45 states, but not in Arizona, so it was running amok here with price gouging. I wish I could remember what industry it was dealing with.

Exxon Mobil sets profit record
Nation's No. 1 oil company reports larger than expected jump in 4Q income to cap record year.
By Chris Isidore, CNNMoney.com senior writer
January 30, 2006: 2:41 PM EST



NEW YORK (CNNMoney.com) - Exxon Mobil Corp. set U.S. records for annual and quarterly profits Monday as it easily topped fourth-quarter earnings forecasts.

The nation's largest oil company reported net income in the fourth quarter of $10.7 billion, or $1.71 a share, compared to $8.4 billion, or $1.30 a share, a year earlier.



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Excluding items, Exxon Mobil (Research) earned $10.3 billion, or $1.65 per share, topping a consensus forecast of $1.44 a share from analysts surveyed by earnings tracker First Call. It also topped the record for quarterly profits it set in the third quarter, when it earned $9.9 billion.

Shares of Exxon Mobil gained 2 percent in early-afternoon trading, helping to take the Dow into positive territory.

For the year the company earned net income of $36.1 billion, or $33.9 billion excluding special items. That's up 31 percent from the $25.9 billion it earned on that basis year earlier.

Exxon Mobil's 2005 net income for the year comes to $1,146 a second. That per-second profit is enough to pay for gas for the average American vehicle to be driven 10,294 miles, at current gasoline prices.

While oil and gasoline prices in the fourth quarter were down from the levels seen in September, that barely dented Exxon Mobil's top line. Revenue for the quarter was $99.7 billion, up from $81.9 billion in the year-earlier quarter, and down only 1 percent from the $100.7 billion in revenue in the third quarter. Full-year revenue came to $371 billion, or just over $1 billion a day.

The Exxon Mobil earnings statement was almost defensive about the record profit.

"There is a great deal of public interest in global energy prices," said a statement attributed to Exxon Mobil Chairman Rex Tillerson. "We recognize that consumers worldwide want and need reliable supplies of affordable energy -- to fuel their vehicles, light and heat their homes and run their businesses. Our strong financial results will continue to allow us to make significant, long-term investments required to do our part in meeting the world's energy needs."

Henry Hubble, Exxon Mobil's vice president of investor relations, told analysts and investors during a conference call that the company had returned about $23 billion to shareholders in 2005 through dividends and share repurchases. The company raised its dividend to 32 cents in the first quarter from 29 cents in the fourth quarter. The company has increased its dividend for 29 consecutive years.

"Our earnings reflect our ability to capture the strong industry condition. More importantly they highlight the things we do exceptionally well," Hubble said, detailing work to deliver strong operating margins and its investment strategy.

Fadel Gheit, oil analyst with Oppenheimer, said the company beat expectations by recovering faster than expected from the hurricanes that hit the Gulf Coast near the end of the third quarter and by posting strong margins in its refining and marketing units, the side of the oil business that can often be squeezed by higher oil prices.

Despite the company record cash flow and a strong cash position on its balance sheet, he doubts the company will use any of its wealth to buy other companies as some competitors have done. Company officials have said they don't want to buy oil assets at current prices but Gheit said he thinks there are also political reasons behind their reluctance.

"That would invite unnecessary and unwanted scrutiny of Exxon," he said.

As to the Exxon Mobil's earnings record, First Call could not definitively say what was the largest annual profit on record. But it appears the previous mark was held by Media One, the cable television operator that eventually became part of Comcast. It posted net income of $26.3 billion in 1998.

But most of that profit came from accounting of a split between cable and telephone units that took place over the year. Media One's income from continuing operations that year came to only $1.4 billion.

The largest operating income before this year may well have been Exxon Mobil's $25.9 billion in 2004.

Earnings up across Big Oil
Of course Exxon Mobil isn't the only oil company reporting sharply better results. The 12 U.S. oil companies in the S&P 500 that have reported fourth-quarter results have seen an average of a 48 percent rise in earnings excluding items in the period, according to First Call.

The list includes most of the large U.S. oil companies, including No. 2 Chevron and No. 3 ConocoPhillips (Research). But it does not include major foreign-based oil companies such as Royal Dutch Shell (Research) or BP (Research), which both have extensive U.S. operations.

The oil companies in the S&P are expected to see full-year earnings of $96.5 billion, when combining reported results and forecasts for the companies yet to report. That also would be up 48 percent from a year ago. And the profit growth is not nearing an end, with analysts surveyed by First Call looking for 15 percent growth in earnings at those companies in 2006.

Strong oil earnings in the third quarter prompted calls in some quarters of Congress for a so-called "windfall profit" tax on oil company earnings, as well as a joint hearing of the Senate Energy and Commerce committees into earnings from big oil. Lee Raymond, who retired as Chairman and CEO of Exxon Mobil in December, was one of five executives from big oil called to testify.

The various windfall profit tax proposal by Sen. Byron Dorgan, D-N.D., failed on when offered as an amendment in the Senate in the fall. Gheit said he doesn't believe that there will be much revival of the talk of a windfall profit tax now despite the new record profit.

"People don't look at oil profits, they look at prices at the pump," he said.

The average price of a gallon of unleaded regular gasoline retreated from the post-Hurricane Katrina record high of $3.057. But after oil and gasoline prices are rising again, with the AAA average showing a nearly 7 percent gain over the last month.

Sheraz Mian, oil analyst for Zack's, agreed the lower gasoline has reduced the pressure for a tax on oil companies, but he's not convinced the companies are out of the woods yet.

"I would not completely rule out noise on this in the next few weeks," he said. He agreed with analysts who see even higher oil profits ahead in 2006. Both he and Gheit have a buy recommendation on Exxon Mobil shares, with Mian having a $70 a share target price.

"We don't see '05 as the peak. We believe '06,for now, looks to be better," he said.

Bah. Yoy pay more for a gallon of Pepsi, or a gallon of Poland Spring than you do gasoline. Who's complaining about price gouging at mall clothing stores which are making many, many times more than the 10% that gasoline folks make on a gallon of gasoline.

The irony of price gouging laws, is that there's actually mandated laws that prohibit gas stations from selling gas below a mandated level. Gas station owners have been getting fined in many states for selling gas below required costs due to sales and promotions.

Crazy.

Harry Reid to manufacturer's: You will make the cars we want.
Harry Reid to consumers: You will buy the cars we want you to buy.

Harry Reid: You're too stupid to be fuel efficient, so we'll just make you be fuel efficient.

Why don't these people upgrade there refineries with these profits? Aren't the majority of them running at 60% capacity? I have no problem with these profits, but at least reinvest them.

I think there was a law in 1970's that prohibited the construction of new refineries.

it's a complex issue but a very good question.

Some of it is due to Katrina, some of it is due to BP's issues at Texas City. Some is due to the companies policies focusing on exploration rather than upgrading the refinery system at this time. It's also tough to find a location to build a new refinery even though the new refineries could refine heavy crude and probably be made more efficient. We probably need a few that do nothing but produce gasoline and none of the heavier stuff like fuel oil and diesel... etc.

There's also the new ULSD stuff that's just shipping recently, I'm not sure if that takes away from gasoline produced or not.

Anyway, great question. I wish I had a better answer.

So far as I know, the refineries here basically at full capacity non-stop. These corporations DO improve, and upgrade their refineries. And they do it on the land already used for refineries. It's the only way they can keep up with demand.

It's not the government's responsibility to control the price of gasoline, period.