Oil Company Financial Data
OIL COMPANY FINANCIAL DATA -- (Senate - July 10, 2006)
Mr. WYDEN. Mr. President, I think we all know that during this part of the session the Senate is going to spend considerable time focusing on energy issues. That is certainly warranted because, if there is one thing that can be agreed on, getting a fresh energy policy is just about the most red, white, and blue step our country can take at this critical time.
During the course of this debate, one issue that is sure to come up is the issue of oil company profits. The oil companies have consistently said that they need these very large profits in order to have the funds to drill and explore for new energy sources. I certainly feel strongly about developing new energy sources and increasing production, but I have been concerned about the role of government. At a time when the oil companies are making record profits and charging record prices, Congress has still been making available record subsidies. To get some clarity on this issue, I believed it was important to get the Congressional Research Service, the independent authority, to look at these issues, to analyze the question of exactly where the oil companies are putting this gusher of revenue they have accumulated recently. The findings in the new report the Congressional Research Service has given to me are striking.
What the Congressional Research Service has found is that the return on equity of the major oil companies has gone up in the last few years six times; the amount of cash reserves of the major oil companies have has gone up, over the same time, about six times; but the amount of money the companies have devoted to exploration and capital investment has only doubled. So what that means, the bottom line, is that the major oil companies are only putting back in the ground a modest fraction of what they have been siphoning away from consumers at the pump across our country.
What I would like to do is break down this report and talk about where I believe Congress ought to go on a bipartisan basis in the years ahead.
On the issue of return on equity, I asked the Congressional Research Service to examine the years of 1999 to present. They found that, with respect to return on equity for the oil companies, it was about 4.5 percent in 1999 and it is nearly 30 percent as of last year. That is an increase of more than six times over the last 6 years. The Congressional Research Service also looked at the cash reserves of the largest oil companies over the last 6 years. They have found that this, as well, has gone up sixfold. So the companies are clearly sitting on gushers of cash from higher oil prices and higher gas prices that consumers are now paying across the country.
I believe it was then appropriate to have the Congressional Research Service analyze what the oil companies are doing with all of this money. Certainly the companies have made the argument that they are investing these profits in exploring for oil and developing new energy technology. That certainly is part of the story, but it is far from the whole picture.
According to the Congressional Research Service, the major oil companies have approximately doubled their exploration costs and their overall capital investment over the past 6 years, but that rate of increase is just a fraction of how much their cash reserves and their return on equity have grown over that period. In addition, Congressional Research Service experts indicate that much of the oil companies' capital investment has been for operating expenses, not for increasing production, and much of what they seem to have invested in exploration has gone for overseas exploration.
Again, you come back to what I think is the clear conclusion of this particular analysis: The American people are seeing the oil companies put back in the ground just a modest part of what the consumer is coughing up at gas pumps across the land.
One of the questions I hope we will ask over this next period of the Senate being in session is, Why are the oil companies not putting some of their burgeoning cash reserves into investment in other technologies, particularly new renewable energy technologies which could help the oil industry diversify and help reduce our Nation's dependence on foreign energy? We ought to examine that issue, and certainly what the Congressional Research Service has done for my office makes a different contribution with respect to this debate and one that I think warrants thorough examination.
The Congressional Research Service looked, for me, at the 10-K reports the oil companies file with the Securities and Exchange Commission. That is the information which Exxon and BP and Shell and Chevron and ConocoPhillips, Valero and Sunoco and Total report to their investors and to Wall Street. But what is in those 10-Ks that are given over to the Securities and Exchange Commission is not the story the oil companies seem to be telling the American people. The oil companies have been running ads in newspapers, claiming that their profits are in line with those of other industries. For example, the American Petroleum Institute has been running a newspaper ad showing the oil and natural gas industry's earnings of 5.9 cents on a dollar of sales, which is just above the 5.6-percent average for all industries. But suffice it to say, how many of the industries listed in these oil company ads are getting the 30-percent rate of return on equity that the Congressional Research Service has found in the report that I make public today?
The oil industry wants the public to believe that the record profits they are making are in line with other businesses, but it seems to me the Congressional Research Service analysis of the oil companies' own reports to the Government tells a very different story. This is particularly important right now because I believe the American people deserve a true accounting of what has been going on behind the numbers at the gas pump and where their hard-earned money has been going for the past several years. The report I release today on oil company financial data shows the oil industry's profits are not only greater than the profits of other businesses, but they also show how the oil companies have not been straight with the American people.
I also think it is timely to have this information about oil company profits because of the debate in both the Senate and in the other body about oil royalty giveaways to the oil industry. At a time of record prices, when oil companies are making record profits that are above what other industries are earning, the question is, Should the oil companies continue to get record subsidies from the taxpayers?
In May, the House of Representatives held a historic vote to put an end to taxpayer-funded royalty giveaways to profitable oil companies. The House of Representatives voted overwhelmingly on a bipartisan basis to put a stop to this waste of taxpayer funds. Just a few weeks before that House vote, I spent nearly 5 hours trying to get a vote here in the Senate on exactly this issue. But despite that extended discussion, I was unable to get an up-or-down vote on my proposal to stop ladling out tens of billions of dollars of unnecessary subsidies to the oil sector.
I believe the Senate ought to have an opportunity to debate and vote on the oil royalty issue, and it seems especially timely after the new report the Congressional Research Service has supplied to me. With the Government Accountability Office estimating that tens of billions of taxpayer dollars could be lost as a result of the oil royalty program, this issue is too important to duck.
Over the next few weeks, as the Senate debates energy, I am hopeful that the Senate will think carefully about the findings of the independent Congressional Research Service. The Congressional Research Service analysis indicates to me that the oil industry in their advertisements and other promotions is not being straight with the American people. The Congressional Research Service has given us a good sense of where the oil sector is actually putting their money, and at a time when their rate of return on equity--30 percent--is certainly very strong and we look at where their cash reserves are--and they are sitting on piles of money--we are not seeing those dollars put back into exploration and development here in our country so we can have a new red, white, and blue energy policy that makes us independent from sources of foreign oil.
Let's work to have a debate in the Senate based on the facts. The Congressional Research Service has now given us illuminating information about what the facts are. Let's make better use of taxpayer dollars than to give away tens of billions of dollars in royalties in a program that began when oil was $19 a barrel and now frequently is well over $70 a barrel. This is a time for the Senate to come together on a bipartisan basis to look at these issues carefully. The Congressional Research Service report provides an opportunity to get the facts out--the real facts--about what is going on in this critical sector of our economy.
I ask unanimous consent that the report of the Congressional Research Service be printed in the RECORD.
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Mr. WYDEN. I yield the floor and suggest the absence of a quorum.
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