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Transcript for June 11
MEET THE PRESS NETCAST & PODCAST |
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MR. RUSSERT: Some Democrats have pointed out that you were just one of four Democrats to vote against lobbying reform, that your position on abortion is much different than the vast majority of the Democratic caucus. Are you out of sync with your caucus on some issues?
REP. MURTHA: I am. There’s no question about it. I’m, I’m much more conservative than, than most of the Democrats in my party. But I take a position I believe in, and I’ve always done that. When somebody comes to Congress, I tell them, “Look, you’ve got, you got to learn a subject, you’ve got to study a subject till you become an expert, and then you’ve got to keep your word.” And that’s what I try to do, and that’s the way I’ll try to lead.
MR. RUSSERT: Congressman John Murtha, we thank you for coming in and sharing your views. And happy Father’s Day.
REP. MURTHA: Nice to be. Thank you very much, Tim.
MR. RUSSERT: Coming next, prices at the gas pump, oil company profits. And our energy future. Can we be self-sufficient? The heads of Chevron, ConocoPhillips and Shell Oil are all here, coming up only on MEET THE PRESS.
(Announcements)
MR. RUSSERT: The chief executives of the nation’s largest oil companies explain prices at the pump, alternative energy and our energy future, after this station break.
(Announcements)
MR. RUSSERT: And we are back.
Gentlemen, welcome all. Let me show you something from the latest NBC News/Wall Street Journal poll. How do you feel about oil companies? Positive, 11; negative, 71. Why is that?
MR. DAVID O’REILLY: Well, I can understand why people would view us negatively because gasoline prices have gone up. And I think, you know, that’s a shock to people. And one of the reasons I think I’m here is to try to explain the solutions to that problem. We’ve got to really deal with the energy supply situation. Demand has grown rapidly over the last few years; supply has not kept pace. And we’re investing to ROE, but it takes time, it takes investment, and it takes access to places to invest, to produce more oil and gas so that we can meet the market needs.
MR. RUSSERT: Why this terrible image?
MR. JOHN HOFMEISTER: Well, I wish people could come inside the company and see how employees are reacting to the high prices as well. They’re energized to go after more supply. The real issue is that demand has outstripped the supply and as a consequence of that, we’re putting more capital into the business than we have in our history. We have more projects running across this country and around the world than we’ve had in many, many years. Our employees are really getting excited about what they can do. And of course, they don’t get up every day to take money away from people; they get up every day to bring energy to people. And that’s what we keep trying to do every day.
MR. JAMES MULVA: I don’t think we really have done a good job as an industry over many decades explaining how we explore and develop energy. And as an industry, we just need to do a much better job.
MR. RUSSERT: But people know that their prices at the pump have gone up, and then they read headlines like this, “Oil giant Chevron Corp’s profits jumped to a record $4.1 billion in the fourth quarter, boosted mostly by the same high oil, natural gas and gasoline prices that have stretched household budgets and enraged politicians over the last year.
“Chevron’s quarterly earnings were up 20 percent compared with $3.4 billion a year earlier.”
And then this one. Equal opportunity, ConocoPhillips, “Thanks to soaring oil and gas prices, ConocoPhillips posted a 51 percent increase in fourth-quarter profits, providing a glimpse of what is expected to be an earnings-season bonanza for the entire industry.
“The Houston-based company’s earnings reached $3.68 billion. ... Full-year profits jumped 66.4 percent to $13.53 billion, up from $8.13 billion in 2004.”
And Shell Oil. “Royal Dutch Shell reported the highest-ever profits recorded by a company listed in the United Kingdom.”
Why are the oil companies making so much more money?
MR. HOFMEISTER: It really goes to the crude price. Crude price is up, the amount of money that is coming from that globally traded commodity called oil is, is at the highest level it’s been in a very long time. That money translates into high profits. If you look at some other portions of the business, for example our chemicals business, or our retail gasoline business, actually their profitability is really struggling. Even with these high prices of retail gasoline, that business struggles to make profit as, as, as they would like to.
Now, when you get the crude price, of course that’s paying for all the capital investment that we’re putting into the business. If we didn’t have this level of profitability, I don’t think we could get the supplies to where they need to get to.
MR. RUSSERT: But many consumers when they read you were on, e-mailed me with the same question: Why couldn’t the oil companies this summer say to the consumers, “Rather than have our profits go up 60 percent, we’ll just have our profits go up 30 percent, and we’ll lower the price of gas at the pump.”
MR. O’REILLY: Well, I think there’s a, there’s a perception that, that, that that this is an extremely profitable business long-term. And over the long-term cycle, it has not been profitable. In fact, we—our profits are in the mid-range for all of industries, if you look at the statistics, and this is BusinessWeek data.
The issue here is the scale of companies. We are enormous companies we have enormous capital investments, in order to provide more energy to the American people. For example, last year we made $14 billion dollars. That sounds like a lot of money. But the return on capital and return on sales were very modest. And this year we’re investing $15 billion dollars back in growing energy supplies. Here at home in the Gulf of Mexico we have one project alone that’s $3 ½ billion dollars to recover oil from the deep water of the Gulf of Mexico, bring it on shore, refine it and then ship it to the markets so that we can meet consumer needs. So the scale of our business is enormous. So the numbers seem big, but the investments are very big as well.
MR. RUSSERT: But you could make less profit and lower prices at the pump if you chose to.
MR. O’REILLY: Not, not in, not in an open market. Because if, if you reduce your price in an open market, demand goes up and you, you, you run the risk of running out of, of oil and gas. So I think the issue here is not, is not price issues. The solution here is to look at how we can increase supplies. This is the fundamental problem. Demand has grown, and we need to, we need to invest in growth of supplies to meet that demand. And that’s something we’re, we’re doing, but it takes time, it takes investment, and, and that product will be delivered to the market in time.
MR. RUSSERT: But you understand consumers. They see, as they drive down the street, different companies’ gas stations all with the same prices, and they’ll say, “This is gouging, this is collusion. These guys are taking advantage of a bad situation worldwide, and exploiting us.”
MR. MULVA: I don’t see it that way. Gasoline prices at the pump for the American consumer is about $3 dollars a gallon. In the western Europe, the Western world, gasoline prices are more like 5 to $7 dollars a gallon. We have an obligation as companies and as industry to add to supply. This is a global business. And it’s not only that we need to add to supply, but we need to reduce demand. In the United States alone we have about 2 percent of world oil reserves, 5 percent of the population, and yet we use about 25 percent of the world’s consumption of oil.
It’s a global business, it’s a global challenge, global problem. We need to add supply. It’s getting more difficult, more challenging. We have to go into more hostile, more difficult places, it costs us more. But we need to do a great deal more work on the demand side. We need to more efficiently utilize energy. So we need to add supply, but we also have to reduce demand.
MR. RUSSERT: But it’s also fair to say you’re in the business to make money.
MR. HOFMEISTER: Well, we are in the business to make money, but most of that money goes right back into the business. You know, we do owe our investors a dividend and a return on their investment, but beyond that it goes right back into the business. And I think Dave is right in mentioning the high cost of projects. We’re looking at projects that take somewhere between 10 and 15 years to develop, for which we’re getting no payback. In other words, we have a project in Sakhalin. We’ve been out there for nearly a decade. It’s still going to be several more years before we get money coming back to us from the crude and the oil and the gas that we produce there. In the meantime, we’ve got other projects that we’re investing in. So the profitability, while it looks like big numbers, it’s all being spent on future energy reserves.
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