Oil Profits Under Fire

In the same marble-walled hearing room where Watergate witnesses were grilled last summer, high-ranking executives of the nation's seven biggest oil companies lined up last week behind a long, bare table for a harsh interrogation. Seated across from them were their inquisitors: nine members of the Senate's Permanent Subcommittee on Investigations. From the moment Chair man Henry M. Jackson called the meeting to order, it was obvious that the oilmen were in for a rough time. They found themselves under fire for accomplishing what has long been considered the goal of the U.S. economic system: making a high profit.

In other times, the ability of Exxon, Mobil, Texaco, Gulf, Standard Oil of Indiana, Shell and Standard Oil of California to ring up nine-month 1973 profits that averaged 46% above 1972's comparable period would have brought on considerable praise. But, at a time of oil shortages and sharply rising prices, the great increases fed suspicions on Capitol Hill that the oilmen were using the scarcity as an excuse for jacking up prices and making extortionate profits. Charged Connecticut Senator Abraham Ribicoff: "While the consumer is suffering, the industry seems to be receiving a bonanza."

Arab Embargo. Those suspicions were heightened by the annual income statements released last week by the three biggest oil companies. During the last quarter of 1973 — which roughly coincides with the Arab embargo against oil shipments to the U.S. — Exxon's profits were up 59% over the comparable period in 1972. For the full year, its profits also jumped 59%, to a record $2.44 billion. Large increases were also reported by other large companies (see box, facing page). The profits amid scarcity, said Exxon Chairman J.K. Jamieson, have reduced the public image of the oil companies "to a particularly low ebb right now." Jamieson even held an unusual press conference to proclaim "We aren't making windfall profits."

Nothing the oil executives have said or done has softened the hostility on Capitol Hill and the Senate hearing produced many sharp clashes. Jackson, who is campaigning hard for the Democratic presidential nomination, took advantage of the inept performance of Exxon Vice President Roy A. Baze. When Baze could not recall the size of Exxon's 1972 dividends, Jackson snapped: "I guess we're going to have to start slapping subpoenas on some of you." Then, in a grandstand play, Jackson phoned a stockbroker and announced that the dividend was $3.80 a share.

At another point, Ribicoff accused the international oil companies of engaging in a "conspiracy" to create a "panic situation" in the U.S. He had no discernible proof for the charge. By week's end Jackson conceded that "these hearings have not turned up any hard evidence that the major oil companies deliberately created the crisis." After the buffeting by Jackson and his colleagues, the oilmen were sore and furious. "They made me feel I was at a criminal trial," said Gulf Oil Co. U.S. President Z.D. Bonner.