Hearing of the House Select Energy Independence and Global Warming Committee
Statement
REP. MARKEY: The Select Committee on Energy Independence and Global Warming is called to order, and we welcome all of you to our very important hearing today.
Yesterday Americans saw that the price of gasoline hit a record- high price. Today, on April Fool's Day, consumers all over America are hoping that the top executives from the five largest oil companies will tell us that the soaring gas prices are just part of some elaborate hoax. Unfortunately, it is not a joke. For nearly eight years, this administration's energy policy has been in the tank. Shortly after President Bush took office, the price of oil was under $20. A few weeks ago, oil reached an all-time record high of $111 and currently trades at about $100 a barrel. During the same period, the price of gasoline has nearly tripled from $1.11 a gallon in 2002 to yesterday's all-time high, when it hit yet another record of $3.29 a gallon. And as we approach the summer driving season, skyrocketing gas prices are likely to soar even higher.
Each week, American consumers go to the gas pump and pay the price for this administration's failed energy policy. Twenty percent of all households in America make less than $20,000 a year. With gas prices at $3.29 a gallon, the poorest 20 percent of American households are spending nearly 10 percent of their income just on gasoline.
American consumers also know that the major oil companies are reaping a major financial windfall. Big oil's profits have more than quadrupled over the last six years. Just last year alone, ExxonMobil recorded more than $40 billion in profit, the great corporate profit in history, and the five companies sitting before us today netted a combined $123 billion in profit in 2007.
And what is the oil industry doing with all this profit? Unfortunately, it goes as much to financial engineering as to renewable engineering. Last year the five largest oil companies spent more then $50 billion on schemes to prop up the price of their stock, and as they rake in the profits at a record clip, the major oil companies, supported by the Bush administration, are opposing legislation that would take $18 billion in tax breaks they currently receive and redirect it to renewable fuels and clean energy.
In April of 2005 President Bush said quote, "With $55-a-barrel oil we don't need incentives for oil and gas companies to explore," and that was true in 2005. With the price of oil now doubled and our planet's thermometer rising, this administration must end its opposition to the renewable energy incentive package that the House passed last month.
So on April Fool's Day, the biggest joke of all is being played on American families by big oil, who are using every trick in the book to keep billions in federal tax subsidies even as they rake in record profits.
Three things must happen immediately in order to ensure that consumers can begin to get relief from high prices.
First, the poorest Americans are now spending an average of 10 percent of their income to pay for gasoline. We need the companies here today to make a similar commitment to American families and pledge to invest at least 10 percent of their profits in renewable energy and biofuels to develop alternatives that will help consumers.
Second, your companies and the Bush administration must support, not oppose, legislation that will unleash the renewable revolution we need in order to become energy independent and cut global warming emissions.
And finally, the Bush administration must stop filling the Strategic Petroleum Reserve during periods of high prices in order to send a signal to the market and oil speculators that Americans won't be held hostage by those high prices.
For too long this administration's energy policy has led to tax breaks for big oil and tough breaks for American families. American consumers shouldn't have to break the bank to fill the tank. The American people deserve answers, and it is time for big oil to go on record about these record prices.
And now I would like to recognize the ranking member of the select committee, the gentleman from Wisconsin, Mr. Sensenbrenner.
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REP. MARKEY: And that completes the time for opening statements from our witnesses. And now we'll turn to recognize members of the committee for questions of the panel. The chair will recognize himself for five minutes for that purpose.
Mr. Simon, last year ExxonMobil reported $40 billion in profits, $28 billion in stock buy-backs, ($)7.5 billion in dividends and executive compensation, but all I can really find is no more than a commitment of $100 million in investment in renewables over the next 10 years. Why is that, Mr. Simon? Why is your company not investing in renewables?
MR. SIMON: Well, thank you, Mr. Chairman, for giving me the opportunity to address the area of alternative fuel.
When you go back to the year 2000, 2001, we as a corporation recognized that we had a huge challenge in front of us, not only as a corporation but as an industry, in meeting a significant growth in energy requirements -- estimated at about 40 percent in the year 2030 compared to 2005 -- while still managing the risks associated with climate change as driven by the increase in greenhouse gas emissions. At that time, we looked at every component, every facet, of alternative energy. We had our best and brightest minds -- the scientists and engineers of the highest caliber in our corporation -- look at it on a fundamental basis. We looked at it all the way from production, on the one hand, all the way through consumption on the other. We call it a well-to-wheels analysis. We looked at it on an energy basis, on the energy balance --
REP. MARKEY: How much have you invested in renewable energy, Mr. Simon, for 2008? What is your budget for renewable energy at ExxonMobil?
MR. SIMON: And I will get to that, Mr. Chairman.
REP. MARKEY: I only have five minutes. It's important for us to get it out on the table. What is the investment in renewable energy, please?
MR. SIMON: Recognizing that we needed to do something of a great magnitude -- the current generation of fossil fuels don't work -- what we did is we said we needed the best and brightest minds from all walks of life and we initiated the Global Climate and Energy Project at Stanford University, which is about --
REP. MARKEY: And how much money are you putting into that?
MR. SIMON: -- about $100 million investment over 10 years --
REP. MARKEY: A hundred million dollars, but you made $40 billion last year.
MR. SIMON: Mr. Chairman, putting more money into something does not necessarily equal progress.
REP. MARKEY: Well, Shell is putting money into wind, BP is putting money into renewables. And we're not talking about ($)100 million over 10 years; we're talking about billions of dollars which are being invested. Why is ExxonMobil resisting the renewable revolution that is being embraced by other companies even in the oil and gas sector?
MR. SIMON: Our analysis is that we are not going to be able to meet the challenge that you would like to meet and I would like to meet with current generation. That's our assessment. We need to leap-frog current generation technology. We need to have breakthrough, world-changing -- and that's what the objective of our Global Climate and Energy Project is at Stanford University. We have 40 breakthrough programs under way looking at every aspect of renewables. We're looking at wind -- I mean solar.
REP. MARKEY: We don't have to --
MR. SIMON: We're looking at biofuels, biomass.
REP. MARKEY: We don't have time, Mr. Simon, okay? We've got people -- you heard in my opening statement -- for the poorest 20 percent in America it's now 10 percent of their income going to paying their gasoline bill. So, as these consumers are at the pump being tipped upside down and having money shaken out of their pocket, your message to them is that you can't do anything for them, that you're about to begin a partnership to think about what you're going to do about a renewable energy agenda. And that's not going to send any message that we're going to put pressure on OPEC that we're about to change business in our country.
MR. SIMON: Well, if we're going to have the kind of impact that you and I want longer term, it's going to take breakthroughs, and that's what we're trying to do there. That does not say that we can't do something to try to address the price at the pump today. About 80 percent of that price, or 70 percent of that price, is crude oil. What can we do there? One thing -- we can moderate demand in terms of the transportation sector.
REP. MARKEY: But you can't have it both ways, Mr. Simon. You can't on the one hand be nickel and diming renewables at ExxonMobil and at the same time be recording $40 billion worth of profits and simultaneously fighting our efforts to move over the billions of dollars into the research in renewables which this country needs to break its dependence on imported oil. You cannot do that, Mr. Simon.
Exxon should make a commitment that they are going to put 10 percent of their profits into renewables so that America has a comprehensive strategy to fight that dependence upon imported oil. Are you willing to make that kind of a commitment?
MR. SIMON: Mr. Chairman, we continue to look at that area. If we identify an area where we think it can have the impact that you're alluding to, we will do that. But we've studied all forms, even anticipating some improvements, and the current technologies just do not have an impact, any kind of appreciable impact, on this challenge that we're trying to meet. And --
REP. MARKEY: Mr. Simon, that is just going to be a continuation of a policy of tax breaks for the oil companies and tough breaks for consumers at the pump, and that just doesn't work. OPEC has us over a barrel and you're saying you're going to study the issue for another 10 years. And with all due respect to Stanford, you have competitors here on this panel who are already investing in multibillion dollar strategies in alternative energy. And I just think that it's time to move to this new agenda for the sake of our country and for the consuming public that really does feel as they've been shortchanged in terms of protecting them against what looks like to be a devastating, long-term prospect of paying $3.29, $4.29 and more at the pump for the indefinite future.
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REP. MARKEY: So we've reached the conclusion of this hearing. I would say to the oil company executives that as President Kennedy used to say that to those whom much is given, much is expected. There has been a windfall of revenues which has fallen to the oil companies represented here, over the last several years. It is highly likely to continue this year and into the indefinite future.
I think that with that great opportunity that you have been given, there is a responsibility that you have to discharge. As I asked earlier, there should be a commitment that each of you make. I would recommend that it be 10 percent of your profits go into renewable energy projects. We will not be able to solve this global climate challenge unless you do so. You are the leading energy companies in our country and in the world. We cannot solve this problem without your full participation.
And similarly, consumers will not be able to deal with this issue without your focused attention upon them. The poorest, the working class, are going to be devastated; they will have to choose between heating and eating. We're reaching that point in our country and it is your responsibility to deal with this issue in a responsible fashion.
To the extent to which you don't have to take all of this as profit and you can lower your prices, I think you should do so. To the extent to which you can deal with this as an issue of speculation in the marketplace and you can support the deployment of the Strategic Petroleum Reserve, which I recommend as a way of piercing the speculative bubble, I recommend that you take that position.
I recommend that you take any position that helps the consumer and that will help this renewable energy revolution. But that's up to you. But all I can tell you is, and I can predict this with a guarantee, that this is the first of many hearings that you're going to have this year before the Congress.
My father always said try to start out where you're going to be forced to wind up anyway. And so I'm asking you each to deal with that issue of the amount of your profits that you put into renewable energy resources this year and for every subsequent year and to also deal with this issue of how it's going to affect blue-collar and poor citizens of our country.
We thank you each for your testimony here before us today.
And with that, this hearing is adjourned.
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