With oil companies on target to earn profits of $96 billion this year, Congress is predictably on the warpath. ExxonMobil, the world’s largest publicly traded oil company, announced third-quarter profits of $9.9 billion. Analysts estimate that ExxonMobil will earn as much as $33.8 billion in 2005.

No company in U.S. corporate history has ever registered annual profits that high. With gas prices just now dipping below $3 a gallon, congressmen have angry constituents who feel the pain of ExxonMobil’s gain. The second shoe will fall when the first winter heating bills hit consumers.

Next Wednesday, Nov. 9, the Senate is calling for hearings and the list of invited witnesses includes some top oil executives: Lee Raymond, the chairman of ExxonMobil Corp; Jim Mulva, chief executive of ConocoPhillips; and John Hofmeister, president of the U.S. unit of Royal Duch Shell PLC. The subject is going to be windfall profits and price-gouging.

Predictably, Democratic Sens. Byron Dorgan, N.D., and Chris Dodd, Conn., have already announced that they want to put a 50 percent tax on the sale of oil over $40 a barrel. The revenue from this special excise tax would be returned to consumers in the form of an income-tax rebate. Other proposals are circulating to apply windfall profit taxes to low-income energy assistance programs that help poorer families pay winter heating bills.

In writing “Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil,” Craig Smith and I argued that government intervention in the oil industry has rarely turned out to help the public, despite good intentions. A strong argument can be made that the gas lines of the Carter administration were caused not by the OPEC oil embargo, but by the Cost of Living Council’s Special Rule No. 1 that in March 1973 imposed mandatory price controls on 95 percent of the domestic petroleum market.

By freezing the price of petroleum for all but independent refiners, the Cost of Living Council prevented gas prices from reaching a market-based supply-and-demand equilibrium. When oil price controls initiated in the Nixon administration were eliminated in the 1980s, the Federal Energy Administration was spending an estimated 5 million hours annually meeting standard reporting requirements from over 200,000 respondents.

Last week, John Felmy, chief economist at the American Petroleum Institute, a trade group representing the major oil companies, told reporters that the industry plans to spend $86 million in 2006 on marketing, refinery expansions, and oil exploration and production. That’s good news, especially when industry analysts are predicting that the six major oil companies will spend some $40 billion this year buying back their own stock. Shareholders like stock buy-backs. Stock prices tend to increase when the number of outstanding shares is reduced.

Consumers, on the other hand, have a different perspective – especially when they realize no new oil refineries have been built in the United States in the last 30 years. With U.S. refineries operating at or near capacity, even the availability of an ample supply of crude oil on the world market will not solve the problem of gasoline that costs $2.75 or more a gallon.

The Energy Information Administration estimates that ExxonMobil and ChevronTexaco together are sitting on proven reserves of approximately 6 billion barrels of oil, about 20 percent of the U.S. total. Oil company TV commercials are beginning to announce that we have reached “peak oil production” and that we are running out. Even British Petroleum has begun pushing the theme that BP stands for “Beyond Petroleum.” Why not? As long as the public continues to believe that oil is fossil fuel, the logical conclusion is that oil is a scarce resource that will not last forever.

Pretty soon, the major oil companies are going to start arguing they are sitting on huge oil reserves not because they are waiting for even higher prices, but because they are socially responsible and they want to conserve our precious and depleting energy supplies.

The Senate should demand that the oil industry executives tell the truth and admit that world oil resources which the EIA estimates at 1.28 trillion barrels of oil has never been larger in recorded human history. Higher oil prices may be necessary to get oil companies to come off their reserves and increase supplies. But when the world markets are awash in oil reserves, not building more refineries is beginning to look like a conscious strategy to keep prices high.

The oil executives in Washington next week are going to be on the hot seat. Let’s just hope the senators can get off their predictable polemical attacks long enough to ask some hard questions, including some questions aimed at themselves. How can we get environmental regulations into some perspective so we can drill the oil we know we have offshore and in Alaska? If we streamline the environmental approval process for building new refineries, will the oil companies commit to building new refineries right now?

Otherwise, we will have a predictable political drama in which the senators posture for points, full of sound and fury, but accomplishing little.

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