By Steven Mufson and Shailagh Murray
Washington Post Staff Writers
Friday, April 28, 2006
Exxon Mobil Corp. reported $8.4 billion in first-quarter profit yesterday, as members of Congress outraged over high gasoline prices hastened to propose measures that would boost taxes on oil firms, open new areas to drilling and provide rebates to taxpayers but would not necessarily alter prices at the pumps.
The earnings outstripped the oil giant's profit in the first quarter of last year. Given current oil market conditions, analysts said, that puts Exxon Mobil on track to break the $36 billion record profit it made last year.
Meanwhile, President Bush sought to show that he was responding to calls for action in the face of rising gasoline prices. While visiting a gasoline station in Biloxi, Miss., Bush renewed his call for Congress to give him the authority to "raise" mileage standards for all passenger cars. White House officials said later, however, that they didn't know when or how the president would use that authority.
Congress has the authority to approve changes in mileage standards for passenger cars, and the executive branch can set them for light trucks without approval from Congress. But neither Congress nor the administration has shown much interest in raising passenger car standards, which were set in the 1970s and haven't changed since 1985. In March, the Bush administration said it would raise average fuel economy standards by 1.9 miles a gallon for sport-utility vehicles, pickups and vans for models in 2008 through 2011, a long-awaited move that environmentalists said was too modest.
In Congress, anger over gasoline prices brought action in the Senate to a screeching halt yesterday, with Democrats interrupting debate over an emergency military spending bill to protest a key oil company subsidy. In a highly unusual move, Sen. Ron Wyden (D-Ore.) waged a solo filibuster on the Senate floor in an attempt to force a vote on a provision that would halt support for what Wyden said was about $35 billion for oil and gas companies. "This is the big one, folks, in terms of energy subsidies," Wyden said during the five-hour standoff. "This is the one where there is no logical case . . . when oil is $70 per barrel."
Various committees and individual lawmakers scrambled to offer relief to consumers, punish suppliers and promote favorite energy-related provisions, most of them offering little or no immediate relief at the gas station pumps.
Senate GOP leaders rolled out a fat package of energy measures, including a $100 rebate to most taxpayers, and reaffirmed authority for state and federal officials to fight price gouging. The proposal also would allow drilling in the Arctic National Wildlife Refuge in Alaska; Democrats called the controversial idea a deal-killer for the rest of the package.
Democrats unveiled their own ideas, including various windfall-profit rebates, a temporary suspension of the federal gas tax and alternative energy investments.
For all the criticism from Congress, Exxon Mobil's earnings fell slightly short of analysts' expectations, and company shares fell 68 cents to close at $62.42 a share.
In an attempt to simultaneously impress investors and calm politicians, Exxon Mobil spokesman Ken Cohen stressed that compared with the year-earlier quarter, the company had increased its worldwide oil and gas production by 5 percent, boosted capital spending by 41 percent and paid worldwide taxes that amounted to a 46 percent rate.
But analysts, while impressed by the production numbers, noted that much of the increase in capital spending came from sharply rising costs for oil services and that the high tax rates were a result of high crude oil prices. In many countries, sliding-scale tax rates rise as prices do; Norway taxes some portion of output at rates as high as 70 percent, and Libya's effective tax rates can go as high as 90 percent, analysts said.
Exxon also said it spent $5 billion buying back its own shares, more than the $4.1 billion spent on exploration and production. The company said it expected to spend $6 billion repurchasing its own shares in each of the remaining quarters this year.
Wall Street analysts discounted the likelihood of congressional action against oil companies. "As someone in the industry for more than 25 years, I've seen it before," said Fadel Gheit, an oil company analyst at Oppenheimer & Co. "Penalizing oil companies does not lower prices at the pump. If we have a windfall profits tax, it will just create another moneybag for the government. It will not increase oil production by one barrel. It will not lower gasoline prices by one cent or alter our dependence on OPEC countries."
Federal Reserve Chairman Ben S. Bernanke also cautioned Congress on the various proposals being floated. In response to a question at a hearing of the Joint Economic Committee, Bernanke said, "Unfortunately, after many years of not really doing as much as we should on the energy front, this situation has arisen. And I don't see any way to make a marked impact on it in the very short run."
Bernanke said a windfall profits tax would reduce incentives for companies. "What we need to do," he said, "is think about whether there are actions we can take that over at least a number of years will put us on a more secure footing."
And he added, "I would like to let the market system work as much as possible to generate new supplies, both of oil but also of alternatives, and for the prices, painful as they may be, to help generate more conservation and alternative uses of energy on the demand side."
While many of the proposals in Congress are familiar, costly and unlikely to be enacted, bipartisan political pressure for action could result in tougher scrutiny and possible sanctions against the oil industry -- until recently one of the closest allies of the Bush administration and the Republican-led Congress
The Senate Finance Committee, for instance, requested federal income tax returns for the past five years from the 15 largest oil and gas companies, based on sales, in what could amount to a congressional audit. "We're seeing record profits and significant executive compensation in the oil and gas industry," said Finance Committee Chairman Charles E. Grassley (R-Iowa). "I want to make sure the oil companies aren't taking a speed pass by the tax man."
The Senate Judiciary Committee unanimously voted to allow the Justice Department to prosecute countries that belong to the Organization of Petroleum Exporting Countries for price fixing in violation of U.S. antitrust laws. "What you have today is an oligopoly, effectively, and I think it's a disaster for the American people," said Sen. Dianne Feinstein (D-Calif.), a member of the panel.
Judiciary Committee Chairman Arlen Specter (R-Pa.) said GOP leaders had assured him they were eager to push the legislation to the floor, pointing out the political pressure -- including a series of Democratic news conferences held in recent days at Capitol area gas stations.
Staff writers Jim VandeHei and Sholnn Freeman contributed to this report.