Transcript for April 30

MR. CAVANEY: Well, first of all, let me explain that that’s one of the typical ways that a politician can react to concerns about this. But over the last several decades, our industry has been investigated over 30 times by federal and state agencies, and every single one of those investigations came out with the same conclusion: We did not participate in anti-competitive behavior, we did not have any collusion, and we were exonerated. I expect any subsequent look and investigation is going to determine the same thing.

MR. RUSSERT: But let’s look at some of the things that, that Senator Durbin talked about, specifically with Exxon. And here, I’ll put it on the screen for our viewers and for everyone else to see. “ExxonMobil Corp., the world’s largest oil company, reported Thursday the fifth highest quarterly profit for any public company in history, posting gains from higher oil prices that were likely to stroke the furor over outsized oil company earnings. ... In January, Exxon posted the highest quarterly profits of any public company in history: $10.71 billion for the fourth quarter of 2005 and $36.13 billion for the full year.” That’s a lot of profit.

MR. CAVANEY: Well, it is, but not for the size of the company. Something has happened, that Dan alluded to. A couple of decades ago, the global oil market changed significantly where the principal competition out there now is national oil companies owned by foreign governments. That required U.S.  investor-owned oil and gas companies to significantly scale up in order to compete with them directly. Those companies have. If you take the percent of profit that they made on top of their sales, what you’ll find is we typically come in pretty close to the all-industry average. Last year, we earned 8.5 cents per dollar, the all-industry average for all of the economy was 7.7 cents, so it’s right about in the band.

MR. RUSSERT: I think what troubled a lot of people is that, two years ago, a bill was passed to give incentives, tax breaks to the oil companies, to invest. And this is what the Connecticut Post reported, “ExxonMobil Corporation invested only $10 million last year on direct research on alternative energy while reaping a record $36 billion in profits. Meanwhile, it handed its retiring chief executive officer a nearly half-billion-dollar parachute. ... The New York Times reported that recently retired Exxon Mobil CEO Lee Raymond received a $400 million compensation package in his final year.” Making that much money, getting taxpayer-funded subsidies, in effect, tax breaks, why wouldn’t Exxon invest more in alternative fuel exploration?

MR. CAVANEY: Well, I can’t speak to a specific company, but I can tell you what the industry’s record did. Over the last five years, U.S. oil and gas companies have invested $98 billion in new technologies, including alternatives and renewables, and that represents 73 percent of the total U.S.  investment, which includes all the federal government’s money and every other business sector. We are investing in the future. We are tied to the consumer, and our job is to provide them the fuels they need regardless of whatever that fuel is.

MR. RUSSERT: But there seems to be an attitude. This was in the Boston Herald, from one of the largest oil refineries in the country, Valero, and it says here: “Valero [Energy] CEO Bill Klesse boasted this week that ‘tighter supplies’ of gasoline had helped produce ‘outstanding (profit) margins.’ And, he said, ‘the outlook for the rest of the year is even better.’”

MR. CAVANEY: Again, I can’t comment for an individual company. But what I can say, the industry itself doesn’t feel that these kind of levels are sustainable, and they’re good, because what happens is you have demand destruction. People who rely on these fuels to run their businesses, to heat their homes and all, they, they are going to end up sending jobs elsewhere.  So we think what we need to do is, as a nation, we should look at a policy framework to make sure that our broad policies are consistent with the world that we operate in today, which is very, very different than 20, 30 years ago, when the last time we really looked at the whole broad policy and made some major changes.

MR. RUSSERT: Mr. Secretary, if, if demand is up but supply is down, why are the profits so high?

MR. BODMAN: For that reason.

MR. RUSSERT: No, think about that.

MR. BODMAN: You know?

MR. RUSSERT: Play it out.

MR. BODMAN: Demand is up.

MR. RUSSERT: Correct.

MR. BODMAN: Right?

MR. RUSSERT: Right.

MR. BODMAN: So you’ve got more demand, you’re going to force price up.

You’ve got, you’ve got limited supply, and you’re going to have...

MR. RUSSERT: But that’s a decision by the oil companies.

MR. BODMAN: No, it is not. That is a decision—those are—oil is traded every minute of every day, and it’s traded basically 24-by-seven. And it’s, it is determined in marketplaces in New York and London and Tokyo, all over the world. That’s the, the—the oil companies do not determine the price of oil; the producers determine the price of oil.

MR. RUSSERT: They determine, they determine, help determine the price at the pump. And if the, if their profits are going up, they have made a decision to add on the cost at the pump at such a level to guarantee higher profits.

MR. BODMAN: That’s—look, the, the president has made, has made a, a—has given instruction to the Justice Department to investigate exactly that. And so that’s what is ongoing. That’s the question you asked Mr. Cavaney, and we are—we will see whether, in fact, that is the case.

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