ExxonMobil chairman and CEO Rex Tillerson testifies on Capitol Hill in Washington, Thursday, May 12, 2011J. Scott Applewhite
As political theatre goes, the Senate Finance Committee's grilling of executives from the five biggest U.S. oil companies on Thursday was about as good as it gets.
The guys in the expensive suits - John Watson, the CEO of Chevron Corp.; Marvin Odum, president of Royal Dutch Shell PLC's U.S. unit; Lamar McKay, the head of BP PLC's American operations; James Mulva, the chief executive of ConocoPhillips; and Rex Tillerson, the boss at Exxon Mobil Corp. - were summoned to Washington to explain why they should continue to receive tax breaks worth about $2-billion (U.S.) a year after collecting profits of $35-billion in the first quarter of 2011 alone.
We've seen this movie before - and on Thursday, Oregon's Ron Wyden brought out the archival footage.
If it was a John Grisham novel, it would have been the turning point. Mr. Wyden, a Democrat, presented video from a similar hearing in November 2005 when he asked the heads of the five big oil companies whether they agreed with then President George W. Bush's statement that oil companies don't need an incentive to drill with a crude price of $55 a barrel. All the executives - including Mr. Mulva - responded that they agreed with Mr. Bush's assertion.
"Mr. Mulva, you were there," Mr. Wyden said Thursday in the 2011 remake of the 2005 film. "Oil is right now around $100 a barrel ... If your company didn't need incentives at $55 a barrel … how in the world do you need incentives at $100 a barrel?"
The ConocoPhillips chief's answer echoed the defence offered by his counterparts throughout the three-hour hearing: That was then, this is now. The executives said historical benchmarks are mostly useless because the cheap oil has been pumped. Every barrel of oil in the future will be more expensive than the last because the crude is coming from harder to reach places.
"The easy-to-find oil has been found," said Mr. Mulva. "Costs have gone up."
When oil profits and politics collide, it's always messy, which explains why the story never changes. (T he Washington Post makes a valiant effort of trying to explain whether the oil industry's tax breaks are overly generous here.)
The counter from the executives was predictable: higher taxes would put them at a disadvantage against their international competitors, many of which are government owned, and their hiring in the U.S. would suffer as a result. There even were veiled threats that gasoline prices would increase should their tax bill rise.
The Democratic majority on the committee appeared unmoved by the executives' arguments. "The five of you are like Saudi Arabia," said West Virginia's John Rockefeller, comparing the executives' defensiveness to the authoritarian Middle East regime that controls the world's largest oil reserves. "You are out of touch with what we are going through."
And what Mr. Rockefeller and his counterparts on Capitol Hill are going through is what makes the latest clash between Washington and Big Oil just a little different than what has gone on before.
In 2005, the U.S. budget deficit was 4 per cent of gross domestic product and shrinking. Now, the shortfall is more than 9 per cent of GDP and Congress is seized with getting the budget under control. In years past, congressional hearings over oil industry profits were solely linking to voters' anger about rising gasoline prices. Today, lawmakers are looking for ways to raise revenue.
The politics behind the Democratic-led initiative to remove tax breaks from the biggest oil companies are clear. As they seek ways to counter Republican efforts to cut social spending, Democrats want to portray their opponents as putting the interests of the oil industry ahead of students who would lose access to student loans and seniors who face reduced health benefits.
New York's Charles Schumer asked the executives what would be better for the country, cutting tax breaks for the oil industry or cutting student aid. None of the executives gave him a direct answer.
"We've got to find ways to reduce our annual deficits and debts," said Max Baucus, the chairman of the Senate Finance Committee. "We've got to find a fair solution."
This article has been corrected from an earlier version