Milestones : Oil Company CEOs Defend Record Profits

The Republican leadership of the Senate called the chief executives of the nations leading oil companies on the carpet last month to explain why they were making a lot of money at a time when their prices were so high.

Lee R. Raymond, chairman and CEO of ExxonMobil, whose $9.9 billion third-quarter profit was an oil-industry record, explained the law of supply and demand. The price [of oil] is set on the world market by willing buyers and sellers, for what willing sellers are willing to sell it for and willing buyers are willing to pay for it, he said.

Petroleum company earnings go up and down, Raymond said. ExxonMobils were up 75% from a year earlier in the latest quarter. The company invests large amounts of money in projects to increase fuel supplies when earnings are high as well as when they are low, Raymond said.

In politics, time is measured in increments of two, four and six years, he said, referring to terms of office for elected officials. In the energy industry, time is measured in decades, based on the life cycles of our projects.

The oil industrys profits, measured as a share of revenue, were no greater than those in other industries, he said. The executives blamed the high prices at the pumps on the high price of the raw material used to make gasoline, which is, of course, oil.

Less than a week later, the Senate Finance Committee voted to impose a $5 billion tax next year on the nations biggest oil companies. The committee must have known that a windfall profits tax that could discourage production, contribute to shortages and create long lines at the pumps would almost certainly be voted down in the House.

Gordon Platt