WASHINGTON - In what's becoming a ritual in the nation's capital, top executives of major oil companies received a heaping of verbal abuse from lawmakers of both parties yesterday and defensively blamed Congress for many of today's energy woes.
While the public relations battle went on in the Senate Judiciary Committee, crude oil prices shot up more than $4 to $133.17 - another record high - on the New York Mercantile Exchange.
The Senate hearing may have served as a cathartic platform to grumble on behalf of constituents, but Americans can rest assured that they'll still pay more for gasoline in the months ahead.
Setting the tone, Vermont Sen. Patrick Leahy, a Democrat and the committee chairman, opened by telling the five oil executives before him that "prices should not skyrocket like this in a functioning, competitive market." His committee has jurisdiction over antitrust issues such as price fixing.
Over the course of three hours, Democrats pounded away on record profits being posted by oil companies, while Republicans hammered home the point that the United States puts most of its available oil off limits to production.
Ostensibly, the hearing was to focus on legislation being considered by Congress, including a measure that would allow the United States to bring price-fixing complaints against members of OPEC, the cartel of major oil-producing nations.
And it was supposed to focus on whether to raise the minimum investment requirements for speculators who have no intention of taking delivery of oil but are pumping billions of dollars into the trading of contracts for future delivery of oil.
But there was little talk of solutions. Most of the three-hour hearing was spent zinging the oil executives, sometimes using props like a giant photo of President Bush holding hands with Saudi Arabia's King Abdullah, who last week politely rejected U.S. calls for significant new production.
"People listening just don't get it ... when demand isn't going crazy, why are prices going crazy?" asked Sen. Herb Kohl, a Wisconsin Democrat who sponsored legislation seeking to allow antitrust actions against the Organization of Petroleum Exporting Countries.
Oil executives didn't think that legislation would help much.
"I don't think suing foreign governments in our courts will do anything," said Peter Robertson, vice president of Chevron Corp.
Kohl interrupted him to note that "unless we deal with OPEC in the foreseeable future, we will not be able to deal with the price at the pump."
Robertson fired back that "I don't think we can control OPEC. I don't think it is our place to control OPEC." The problem, he insisted, is that "there's not much spare [production] capacity in the world."
This lack of spare capacity globally, said the oil executives, is giving speculators the room to push up prices because of fears that supply could be disrupted.
"What you are seeing is the market's perception of supply and demand ... because when they look at that [scarce] spare capacity there is a risk premium in the market today," said J. Stephen Simon, senior vice president of ExxonMobil Corp.
Since 2005, the traditional correlation between global days of oil in inventory and market price has broken down, he said, because of three factors: growing political uncertainty in oil-producing countries, a weakening U.S. dollar and an increase in speculation in oil markets because of the first two changes.
Most of the oil chiefs acknowledged that when measured through the prism of a pre-2005 world, today's oil prices should be far lower.
How much lower?
Shell Oil Co. President John Hofmeister suggested a range of $35 to $65, with $70 or more for high-tech projects in deep ocean waters. BP America Inc. President Robert Malone offered $60, and ExxonMobil's Simon, who drew most of the heat from lawmakers, said: "I have no idea what the price should be. I think the market determines that."
The hearing began on a humorous note when oil executives were asked to restate their own personal compensation, which is public record through company filings with regulators.
Several sheepishly listed salaries and compensation between $2 million and $5 million a year.
But John Lowe, executive vice president of ConocoPhillips, couldn't remember his exact salary.
"I wish I made enough money that I didn't know how much I make," Leahy shot back to guffaws in the hearing room. "Do you suppose you might be able to find out how much you make and let us know?"