Sanders Reacts as Big Oil Profits Swell

WASHINGTON, July 31- Exxon Mobil reported today its best quarterly profit in history, posting a 14 percent increase in second-quarter net income. Shell, Europe's largest oil company, reported a 33 percent increase. Senator Bernie Sanders (I-Vt.) reacted in remarks prepared for a Senate floor speech:

"Today there is some good news and some bad news. The bad news is that oil is at $123 a barrel and working people are paying $4 for a gallon of gas, and this coming winter residents of the Northeast could be paying over $5 for a gallon of heating oil. But there is some good news. Today, the CEOs of Exxon Mobil, Shell, BP and ConocoPhillips are celebrating. They're feeling pretty good. And, they have good reason to feel that way.

"As a matter of fact, since George W. Bush and Dick Cheney have been in office, the five largest oil companies have made over $640 billion in profits. This includes $212 billion for Exxon-Mobil; $157 billion for Shell; $125 billion for BP; $80 billion for ChevronTexaco; and $66 billion for ConocoPhillips.

"Believe it or not, the Big 5 oil companies made more profits during the 2nd Quarter, than they did during the entire year of 2002.

"Now, with the exception of my Republican friends here in Congress, there are very few people in this country who believe the oil companies give one hoot about the well-being of the American people. Our Republican friends are saying that if we just give these huge oil companies more acres offshore to drill for oil, they will certainly do the right thing, as they always have, for the American people. Let's just trust those big oil companies because they are really staying up day after day, night after night, worrying about the well-being of the American people. That is what their full-page ads in the New York Times and all their ads on television are telling us. Well, it is good to see there are at least some people in America who believe that. I don't.

"Let me tell you, big oil companies are so concerned about Americans paying high prices for gas and oil that this is what they are doing with their profits. In 2005, ExxonMobil gave its CEO, Lee Raymond, a $398 million retirement package - one of the richest compensation packages in corporate history. They weren't going out looking for new land to drill on, they weren't building more refineries, and they weren't working on energy efficiency. They gave their CEO a $398 million retirement package. In 2006, Occidental Petroleum, gave its CEO, Ray Irani, over $400 million in total compensation.

"The situation is so absurd and the greed of the oil companies is so outrageous that these companies are not only giving their executives huge compensation packages during their life here on earth, but they have also created a situation, if you can believe it, where these oil companies have carved out huge corporate payments to the heirs of senior executives if they die in office. I guess this is what happens when you have more money than you know what to do with.

"According to the Wall Street Journal, if the CEO of Occidental Petroleum dies in office, his family will get $115 million. The family of the CEO of Nabors Industries, another oil company, would receive $288 million. This would be funny if it were not so pathetic in the sense of the impact this type of spending has on the American people.

"Not only are huge oil companies using their record-breaking profits on big compensation benefits for their CEOs, but they are also spending large sums of money buying back their own stock. In other words, when they are making these very large profits, they are not going out drilling for more oil, as our Republican friends are suggesting.

"In fact, while Americans are struggling to pay for the skyrocketing price of gasoline; big oil companies are having an entirely different problem. For the past seven years, big oil companies are struggling to figure out what they are going to do with all of their windfall profits.

"Let me quote from a headline taken from the front page of the Wall Street Journal way back on July 30th of 2001, ‘Pumping Money: Major Oil Companies Struggle to Spend Huge Hoards of Cash.' According to this 2001 article, ‘Royal Dutch/Shell Group said it was pumping out $1.5 million in profit an hour and sitting on more than $11 billion in the bank.' That was in 2001. Since that time Shell's profits have more than tripled.

"On April 18, 2005, Fortune Magazine published an article with the Headline "Poor Little Rich Company," referring to Exxon Mobil. According to this article, "Exxon Mobil CEO Lee Raymond suddenly has a new anxiety: how to spend the windfall wrought by $55 a barrel oil. By the end of April [of 2005], Exxon will have a cash hoard of more than $25 billion . . . . At a time when domestic energy production is declining and drivers are paying a record $2.15 a gallon [remember, this was in 2005], American consumers, not to mention politicians, are likely to start focusing on whether Exxon is spending enough to find oil and gas. While Exxon is returning more money to shareholders via dividends and buying back more of its stock, its spending on drilling and other development activities actually declined in 2004 -- even though crude prices jumped by a third." That was when the price of oil was $55 a barrel and gas was $2.15 a gallon. Today oil is over $123 a barrel and gas is about $4 a gallon.

"What is happening today? Big oil companies are spending even more on stock buybacks and CEO compensation and less on trying to produce more oil.

"For example, ConocoPhillips recently announced that it plans to give all of the $12 billion in profits it made last year back to shareholders, paying more than $3 billion in dividends and spending the rest to buy back shares of its own stock. To put this in perspective the money that ConocoPhillips is spending on stock buybacks and dividends is enough to reduce the price of gas by 9 cents a gallon throughout the entire United States.

"Now, I want my Republican friends to listen closely. They have been saying over and over again that big oil desperately needs all of these windfall profits to drill for more oil. But, guess what? According to the CEO of ConocoPhillips, James Mulva, ‘We like the discipline of the share repurchase. If we find that we have more cash flow, it's not really going to be going toward capital spending.' In other words, ConocoPhillips won't use their windfall profits to drill for more oil, or invest in renewable energy, or explore for new sources of oil discoveries no matter how much their profits rise.

"Overall, since 2005, the five biggest oil companies have made $345 billion in profits and spent over $250 billion buying back stock and paying dividends to shareholders. Last year, Exxon Mobil spent 850 percent more buying back its own stock than it did on capital expenditures in the United States. The $38 billion in windfall profits that ExxonMobil gave back to shareholders last year, could have been used to reduce gas prices at the pump throughout the United States by 27 cents-a-gallon for the entire year.

"Let's not kid ourselves. Since 1998, the oil and gas industry has spent over $616 million on lobbying. Who have they hired? Well, on April 8th of this year, The Hill reported that Chevron hired former Majority Leader Trent Lott, a Republican; former Senator John Breaux, a Democrat; their sons Chester Trent Lott, Jr. and John Breaux, Jr.; and Trent Boyles, who was Lott's Chief of Staff to lobby Congress on issues relating to trade, climate change, and energy taxes. Exxon Mobil has hired former Senator Don Nickles, a Republican from Oklahoma, who served in this body for 24 years, to lobby Congress on behalf of their issues. These are just a few of the hundreds of lobbyists that big oil and gas companies have hired to influence Congress, many of them former Senators, former Congressmen, and former Congressional staffers. And, that is one of the reasons why, among many other reasons, this Congress, in recent years, has decided to give some $18 billion in tax breaks to oil companies despite their record-breaking profits.

"In addition, since 1990 big oil companies have made over $213 million in campaign contributions. And that is a simple fact. And, lo and behold, what we are hearing today -- just coincidentally, no doubt -- is that the most important thing we can do in terms of the energy crisis is to provide more land offshore for the oil companies to drill at a time when they already have some 68 million acres of leased land, which they are not drilling on today.

"The American people want action, and there are some things we can do -- not in 15 or 20 years but that we can do right now.

"First, we need to impose a windfall profits tax on big oil companies so that they would be prohibited from gouging consumers at the gas pump. Unfortunately, instead of taking away big oil's windfall profits and giving it back to the American people, Republicans want to provide even more tax breaks to big oil. In fact, Sen. McCain has a plan that would give Exxon-Mobil a $1.5 billion tax break.

Now, we have heard Republicans give three reasons as to why they are opposed to a windfall profits tax. First, Republicans claim that the last time Congress enacted a windfall profits tax in 1981 it had the effect of increasing our dependence on foreign oil. Wrong. When Congress repealed the windfall profits tax in 1988, the U.S. was importing 7.4 million barrels of oil a day. Today, the U.S. is importing over 13.4 million barrels of oil a day. We are far more dependent on foreign oil today without a windfall profits tax than we were 20 years ago when we had a windfall profits tax.

Second, my Republican friends tell us that the windfall profits tax didn't work because Congress repealed it in 1988. That is also wrong. While I would have structured it differently, the fact of the matter is that from 1981 until 1988 when the windfall profits tax was repealed, the price of oil fell from $35 a barrel to less than $15 a barrel. In addition, gas prices at the pump fell from $1.35 a gallon to 90 cents a gallon - a drop of 45 cents a gallon. And, the federal government collected over $80 billion in revenue.

The reason why the windfall profits tax was repealed was due to low oil and gas prices, which makes perfect sense. If oil and gas prices are low, big oil companies are not making windfall profits and there is no need for a windfall profits tax. If gas prices at the pump were only 90 cents a gallon, I would be one of the first Senators to say we don't need a windfall profits tax. But, they are not. They are over $4 a gallon.

Finally, Republicans claim that big oil companies need to keep their windfall profits so that they can increase production and build more refineries. That particular argument is laughable. Big oil companies have been making windfall profits for over seven long years - and they are not using these profits to build more refineries and they are not using it to expand production. Instead, they are using this money to buyback their own stock, increase dividends to their shareholders, and enrich their CEOs, as I have explained earlier.

"Not only do we need to impose, a windfall profits tax on these extremely powerful oil corporations, but we also have to address what I perceive is a growing understanding that Wall Street investment banks, such as Goldman Sachs, Morgan Stanley, JPMorgan Chase, and hedge fund managers are driving up the price of oil in the unregulated energy futures market. In other words, they are speculating on energy futures and driving up prices.

"There are estimates that 25 to 50 percent of the cost of a barrel of oil is attributable to unregulated speculation on oil futures. We have heard from some leading energy economists, and we have heard from people in the oil industry themselves who tell us that 25 to 50 percent of the cost of a barrel of oil today is not due to supply and demand or the cost of production but is due to manipulation of markets and excessive speculation. In essence, Wall Street firms are making billions as they artificially drive up oil prices by buying, holding, and selling huge amounts of oil on dark unregulated markets.

"Some of my Republican friends claim that the increase in the price of oil has nothing to do with speculation, but it is interesting to me that we have had executives of major oil companies--major oil companies--who have come before Congress and who are saying, Why is oil $125, $130, and $140 a barrel?'' Do you know what they say? The CEO of Royal Dutch Shell testified before Congress and said: ‘The oil fundamentals are no problem. They are the same as they were when oil was selling for $60 a barrel.' This is not some radical economist. It is not some leftwinger. This is a guy who is the head of Royal Dutch Shell.

"The CEO of Marathon Oil recently said: "$100 oil isn't justified by the physical demand in the market."

"I know my Republican friends have a lot of respect for the oil industry, a great competence in them. They love them and give them huge tax breaks. So maybe they should listen to what some of these guys are saying in terms of oil speculation.

"For those who believe that excessive speculation is not causing oil prices to climb higher, let me just say this. Over the past 7 years, Enron; BP; and Amaranth were caught red-handed manipulating the price of electricity; propane; and natural gas. Each time, supply and demand was to blame and each time the pundits were proven wrong. Excessive speculation; manipulation and greed were the cause. Enron employees are in jail for manipulating the electricity market in 2001; BP was forced to pay a $300 million fine for manipulating propane prices in 2004; and the Amaranth hedge fund collapsed after manipulating natural gas prices in 2006.

"The Stop Excessive Speculation Act introduced by Majority Leader Reid begins to seriously address this problem. We need to pass this bill as soon as possible.

"The bottom line is that it is time for the United States Senate to say no to big oil companies and greedy hedge fund managers and yes to the American people."