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BLOOMBERG: Chevron, Conoco, Shell Defend Oil Profits, Citing High Demand

June 18 (Bloomberg) — Top oil executives at ConocoPhillips, Chevron Corp. and Royal Dutch Shell Plc defended the industry’s record profits amid high U.S. gasoline prices, saying the money is being used to produce more fuel to satisfy demand in the U.S.

“We have enormous capital investments to bring energy to the American people,” David O’Reilly, chief executive of San Ramon California-based Chevron Corp., said on NBC’s “Meet the Press” program, where he was joined by James Mulva, chief executive of Houston-based Conoco, and John Hofmeister, U.S. chairman of Hague-based Shell. “Last year we made $14 billion. This year we’re investing $15 billion back in growing energy supplies.”

The world’s biggest energy companies are facing political scrutiny and consumer hostility in the U.S. as gasoline prices close in on record highs reached after Hurricane Katrina last summer.

A U.S. House committee in May asked Conoco, Chevron and Shell, along with Exxon Mobil Corp. and BP Plc, to explain what they’re doing with their profits. The House demand followed a Senate inquiry into the tax returns of the 15 largest oil and gas companies in the U.S.

Exxon Mobil, BP, Shell, Chevron and Total, the five largest publicly traded oil companies, earned about $29 billion in the first quarter of this year, or $4.46 for every person on Earth.

The U.S. Federal Trade Commission last month cleared the oil industry of price gouging accusations stemming from last year’s hurricanes. The FTC said a nine-month probe showed fuel providers didn’t manipulate the market.

Pump Prices

Cutting prices at the pump isn’t a viable option and could ultimately hurt consumers, O’Reilly said today.

“If you reduce your price in an open market, demand goes up and you run the risk of running out of oil and gas,” said O’Reilly. “So I think the issue here is not price. The solution here is to look at how we can increase supplies.”

The average U.S. pump price is about $2.906 a gallon, according to the Energy Department. The record U.S. pump price of $3.069 came last year after Hurricane Katrina disrupted supplies. In the U.K., the average gasoline pump price is equal to $6.87 a gallon. It’s $7.48 in the Netherlands and $6.59 in France, data compiled by Bloomberg show.

O’Reilly, Mulva and Hofmeister said that alternative fuel sources aren’t likely to meet U.S. energy demands for the foreseeable future. And a surge in demand by oil companies for the corn used to produce ethanol, a gasoline alternative, might cause food prices to rise, Hofmeister said.

“If we start sucking up, as oil companies, all the ethanol, it’s going to hit the price of eggs, the price of bacon, the price of hamburger, the price of Doritos and Fritos,” he said. “There’s only so much corn to go around.”

To contact the reporter on this story:
Otis Bilodeau in Washington at  [email protected].
Last Updated: June 18, 2006 15:16 EDT 


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