Americans are getting fed up with filling up, paying $4 a gallon for gas with no relief in sight.
Meanwhile the top oil companies made about $35 billion in profits in the first quarter but continue to receive billions of dollars in tax breaks. That was a point of criticism at a Senate hearing on Thursday.
As Senator Max Baucus (D-Montana):
“It just seems, frankly, that you are making a lot of money. That’s fine. That’s the American way. But it also seems like maybe the subsidies are not really that necessary anymore.”
But the companies fought back, including James Mulva, CEO of ConocoPhillips (NYSE: COP):
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“We earned $11.4 billion last year and we paid $8.3 billion in income taxes as well as $3.1 billion in other taxes, so our total world-wide taxes paid actually equaled our income. So any fair-minded person would likely agree that we pay our fair share.”
The impact of high gas prices is dramatic. According to the International Energy Agency, U.S. demand fell 2% year-over-year in the last 2 months, and there is evidence Americans will drive less this summer.
Oil prices have been soaring. Though off recent highs, oil’s still trading close to $100 a barrel.
While not directly blaming speculators for the run up in oil prices, in an exchange between Senator Maria Cantwell, Exxon Mobil (NYSE: XOM) CEO Rex Tillerson strongly implied that based on supply and demand, prices should be much lower.
Cantwell: “What do you think the price would be today based on fundamentals of supply and demand?”
Tillerson: “Well again if you were to use a pure economic approach the economist would say would be set at the price to develop the next marginal barrel.”
Cantwell: “What do you think that would be today?”
Tilerson: “It’s pretty hard to judge but when we look at it, it’s going to be in the $60 to $70 range.”
But for consumers, that’s little comfort right now. Retail data out Thursday showed, as suspected, Americans are spending more on gas at the expense of other purchases.
Bottom line: The top executives of Chevron, ConocoPhillips, Shell, BP America, and Exxon Mobil faced a grilling on Capitol Hill about the high price of oil and gasoline, as well as defended industry tax breaks.