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Oil Dips as Execs are Grilled - Money Matters for 11/9/05
The price of crude oil fell to its lowest level in more than three months, settling at $58.93 a barrel for December delivery on the NY Mercantile Exchange Wednesday.
Ironically, the drop in prices is occurring just as Congress begins questioning the motives and practices of executives of some of the world's largest energy companies at special hearings in Washington, D.C.
Chief executives of ExxonMobil, Chevron, ConocoPhillips, BPAmerica, and Shell Oil Company testified before a committee of Senators convened to investigate various claims of price gouging and record profits prior to, during and after hurricanes Katrina and Rita, which whipped the Gulf Coast in September.
The five companies together reported third quarter profits of nearly $33 billion at a time when average drivers were feeling the pinch at the pump from gas prices over $3.00 a gallon.
Though prices have fallen since the summer, Congress and the American public are asking the oil execs to explain why prices ramped up so much during what was not only a crisis situation, but also one of the busiest weekends - Labor Day - for driving in America.
I have to admit that I could not even stomach the answers from Lee Raymond, Chairman of ExxonMobil, as he appeared on the Charlie Rose show last night. After Raymond avoided answering Charlie's direct question, "What do you do with the profits?" (ExxonMobil reported nearly $10 billion in profits in the quarter) for the third time, I shut the TV off.
Raymond's response to the Senate - he and the other executives are testifying without being under oath - was similar, saying that oil company profits rise and fall, and that money earned is largely reinvested.
It's a rather well-worn excuse and one that really doesn't answer the questions of why prices rose so much when there was absolutely no shortage or why prices rose uniformly even though the oil companies are supposed to operate in competitive markets.
The oil companies raped the American public and will likely do so again until Americans start being smarter about their driving habits and overuse of the family car. We're spoiled by the convenience of the auto and the oil companies have us - excuse the pun - over a barrel.
The truth is that the world is awash in oil and energy sources that are not about to run out. The arguments routinely quoted from Dr. M. King Hubbert's "Peak Oil" are largely discredited by a new book on the subject, Black Gold Stranglehold by Jerome R. Corsi and Craig R. Smith, who claim that supplies of oil are nearly inexhaustible in that they are constantly being created deep beneath the earth.
That kind of information won't likely make it to the nightly news any time soon, as the corporate stranglehold of oil supplies has nothing on the tight reins on the news media.
It is easily believable that the supply of oil is dramatically understated, to the glee of the oil barons, and that supply concerns will continue to keep them lining their pockets with dollars from the world's drivers.
Also of particular note is that the federal government is a main beneficiary of higher gasoline prices because federal taxes are a percentage of retail sales. Higher gas prices mean more revenue for our leaders in Washington to spend.
It's a sorry day in America when corporate leaders are brought in to testify without the requirement of being under oath. They are free to tell any kind of tall tale they choose and the penalty for their prevarications most likely will be another round of fat bonuses and stock options.
While this little drama was being played out on Capitol Hill, the markets responded with a yawn and a pause. The markets might as well have been closed as the movement was in a narrow range on all indices and though the Dow, Nasdaq and NYSE all recored gains, they were marginal.
PLEASE NOTE: I will be taking the next few days off, getting a head start on a long weekend. See you next week.
Dow Jones: +6.49; 10,546.21 close
NYSE Advancers: 1789
Nasdaq Advancers: 1648
NYSE New Highs: 101
Nasdaq New Highs: 106
Gold: +5.20; 467.50 close
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