ground sites. do you see that as a reality? is there a place in this country that that can be done? >> i do not know for certain. i have not seen the report. but i do not know why it could not be done. i do think their locations in the country that would be willing -- i do think there are locations of the country that would be willing to host storage for some time. of course, that brings jobs and all sorts of reasons why communities would consider that possibility. i have not seen the blue-ribbon panel report to indicate or to understand what kinds of locations they think would be appropriate. >> last question on the broader budget debate, the senate minority leader mitch mcconnell made it clear that medicare

needs to be part of any deal on the debt limit. democrats are not in love with that idea and democrats want to revenue, as you have mentioned, and republicans have taken that off the table. where do you see the compromise emerging to actually avoid a catastrophic freefall? >> i am not too good at looking at crystal balls and telling you what will happen in the future. i do think that every time we have made serious progress in reducing the deficit since i've been here and during the clinton years and before that, and george h.w. bush when he was president, it was done through a combination of spending cuts and tax increases or revenue increases. i think that is the right formula. if we will get this dead seriously reduce, it will take

the kind of combination again. >> you are retiring. what is your best moment in the senate to? >> i do not have a best moment. >> finest memory? >> i have 29 years, 20 and a half, -- 28 and a half years, there have been a lot of good moments and lots of frustrations, too. i am sure that everyone serving in the senate would seat the same way. >> thank you. >> thank you. >> we're back with the reporters. if the senate brings a bill this week dealing with tax breaks for the big oil companies, what will they try to accomplish? >> they would cut $21 billion in 10 years in tax breaks for these oil companies, the big five. it does not affect the smaller oil companies. really, it is a political thing.

it has no chance of getting through the house. it probably does not even have a chance of getting in or close to the 60 votes it needs in the senate. what is designed to do is -- the senate democrats of trying to put contracts for well subsidies in with republican medicare benefit cuts. you want to cut medicare benefits but you have these oil subsidies to want to project. the problem that the democrats have is that they do not have a budget yet. they do not have their own budget proposal. this is someone that they're so united on, but they have plenty of folks in their own caucus who do not like this, people from oil states. senator bingaman himself said

that he does, and the strategy, but he is not even committing to voting for this. -- said that he does not mind the strategy, but he is not even committed to voting for this. i have been asking a lot of senators, a lot of members, this question. what will you do right now about gas prices? senator bingaman said that there is not a lot they can do. if there does not seem to be any kind of real bipartisan proposal coming forward to deal with anything even in the short term are the long-term to get through the both chambers and to the president's desk. looking to congress right now for a break is probably the wrong place to look. >> compare with the democratically controlled senate is try to do on energy, possibly this week, with what the republican controlled house did last week and plans to do on

energy legislation. >> republicans in the house have three bills that they passed that would open up offshore drilling. they say the obama administration has basically put the gulf of mexico drilling in a stranglehold with its regulations after the ndp will spill last year. -- after the bp oil spill last year. in the senate, there's almost no support for it. >> it sounds like them these bills are going to the president's desk. what is the future policy temperature? >> senator bingaman said that the obama administration is working with congress to push forward a bigger package of energy. i think we will see -- i do not think -- the people i'm talking with say they do not think it will happen this year.

we will see about next year. >> one thing that is essential for a small potatoes still, maybe something ending up in the budget deficit talks, finance chairman baucus said this week jokingly that what if we give you more drilling in you give it a tax break. he said he was not here to negotiate. there is the potential for may be some compromise to give up some tax breaks if reopen of some regulations and make it easier to drill. there is always -- where there is a will, there is a way in congress. there is a wild card out there. that is the public. if they have $4 per gallon gasoline, that will keep the pressure on them to do something. the only bipartisan thing that i have a hearing about on the hill and energy are things such speculation.

senator collins from maine, senator kent well from washington, they're working on trying to cut down on speculation, making it harder for someone who was buying oil contracts but will never use them, just try to speculate -- they really want to crack down on that. that would cut the price of oil. that could be the kind of thing that could get some bipartisan support at least to write letters. as far as something that would actually pass in congress, that is a lot to offer. >> thank you for being part of our program. >> it was good to be here. >> you can see a replay of " newsmakers" letter today at 6:00 p.m. eastern, 3:00 p.m. pacific here on c-span. coming up, we will hear more about energy policy and gas

prices from testimony from oil executives from last week. and new report shows social security and medicare becoming insolvent sooner than we thought. and then there's the president's speech in el paso on immigration. later today, former house speaker newt gingrich, who officially announced his presidential bid early in the week. we will show you this speech from friday night to georgia republicans. he said -- he spoke at the state party annual conference. >> what kind of truces do they may to become -- what kind of choices do they make to become terrorists? >> in his new book, richard m initer talks about terrorist

attacks. >> these terrorist entrepreneurs. >> inside the mind of a terrorist, tonight on c-span's "q&a." you can also download a podcast available online at c-span.org /podcast. >> execs from the top five largest oil companies testified on gas prices and energy policy before the finance committee. they are proposing ending $21 billion in subsidies for the oil companies as the deficit- reduction measure. the senate hearing is about three hours and 25 minutes.

in 2005, president george w. bush said, "with $55 oil, we don't need incentives for oil and gas companies to explore.

there are plenty of incentives. that was president bush, 2005. today oil costs more than $100 a barrel. we will again look at the oil and gas incentives and how they've affected the industry and prices at theump. we'll asthe same question our 43rd president requested -- asked. is it wise to continue gas breaks given to the largest oil companies every year? gas prices are nearly $4 a gallon today and experts anticipate they'll remain that way for the remainder of the season. that means gas prices are up more than $1 a gallon compared to last summer. in fact, families will pay an average of about $825 more for gas this year than last year. in the rural areas like montana where people drive farther, the

increase is more like $1,200 for household. the five largest oil companies collect lively earned more than $50 billion in the first quarter of 2011 alone. physicists should, of course, make a profit. that's the american way. drives our economy. but to -- do these very profitable companies actuay need these terps subsidies? energy incentives should help us build the energy future, not pad oil company proffers. they want us to develop energy sources that won't be defleeted like winand sun. we can't reduce using fassel fuels overnight. they're here for a long time. we must work with them and get them as clean as possible as we

convert to renewables. but vestments in clean energy will move us away from oil. we have to scrutinize every dollar in energy subsidize we spend. the $2.1 billion every year we spend on subsidies on the largest oil and gas companies are not prove moving us closer to our energy goals. everyone today finds their budgets are tight. families, governments, households. congress is also debating the west -- best way to address our deficits and debt. some are proposing cutting medicare for seniors. others slashing pell grants for students. i think all americans agree as we tighten our belts we all must sacrifice together equally, shared. so we have to fake a hard look at every subsidy and every spending program to be sure

we're using our dollars wisely. in 2004, congress created the domestic manufacturer duction, often referred to as section 199. this deduction is designed to still -- stimulate manufacturing in america. i remember it back when it was enacted to replace the fisk e.t.i. it was basically not ud by e-- the majors so the 199 was essentially a gift given to e majors, according to my recollection because they were not using the so-called fisk e.t.i. so 199 was essentially a gift. each company here today has claimed this deduction but what have taxpayers received in return? these tax breaks prove to be more valuable their medicare or pell grants. these tax breaks have not lowered prices.

when these were created, retail gas prices averaged $1. 8 per gallon. by 2008 prices had rison to $3 .20 per gallon and last week they approached $4. these tax breaks have not moved us toward energy independence. according to a study in 2009, in all the subsidies for the oil and gas industry were eliminated, domestic production would fall by less than one-half of 1%. that's the entire energy. today we're only talking about the five largest. they have the most resources and are the -- excuse me. the big five have the most resources and are the least dependent on government subsidies. so the effect on domestic

production for these companies would be less. some argue that eliminating tax breaks for these companies will raise prices at the pump or force layoffs. the oil and gas industry has launched argument against this. but a 2007 analysis found that repealing oil and gas breaks would not raise energy prices for consumers. would not. why? very simple. oil prices are set on a world market. and the u.s. share of production is only about 10%. that makes it difficult, if not impossible, to pass on the costs of losing these subsidies to consumers. given prof of $35 billion in just the first quarter alone, it's hard to find evidence that repealing these subsidies would cut domestic production or cause layoffs. after all, based on first

quarter profits, these tax breaks represent less than 2% of what these companies are on pace to make this year and even without these tax breaks, these companies would be clearly highly profitable. the chart behind me to my right lists the financial documents the companies here tay have filed with the securities and exchange commission. basically documents first timed with the s.e.c. according to those documents, the average cost to produce a barrel of oil was about $11 in 2010. and the average price these companies received for a barrel of oil was about $72. i don't say this is exact but it's roughly what the s.e.c. documents show. today oil prices are a lot higher. 40% higher, which would increase these large profit margins much further than shown on this

chart. so it is hard to manage that -- imagine that companies fed with these opportunities would cut production. now, some might argue that these subsidies or record profits create much-needed jobs. but those same documents, public documents filed at the scurts and exchange commission, show that nearly 60% of these companies' 2010 profits went to stock buybacks and to dividends, not to job creation. we can put this money to better use and we should. we should use it to reduce our deficit instead of putting the burden on seniors and our children's future. it's choice, everybody. it's shared choices, america working together and looking at the facts and seeing the degree to which limiting these subsidies would in fact be a fairer way for us to start to reduce our defit because

reducing these subsidies, evidence shows will have virtually no effect on jobs or loss of jobs in this country. for reasons i've indicated. so i urge us to do what's right, what's right for our -- wise for our country. this is one place to examine, look at it, see what the facts are and there are a lot of otr areas we can look at. today can only address one subject at a time and the subject today is the one at hand. senator hatch? >> well, thank you, mr. chairman. everybody is angry about high gas prices and i can tell yo that i'm angry aut it. the press keeps telling us that we need america to come together and put aside partisahip. nothing makes for a kumbaya moment like high gas prices. republicans don't like paying high gas prices anymore than democrats do.

with one voist america is telling to us do something about it. unfortunately for some, the political philosophy of rahm emanuel is too hard to waste, never let a crisis go to waste. they decide to exploit high gas prices for political gain. this is a double gain for those politicians. on the one hand they are able to score cheap political points. on the other hand all their fury signifies nothing. it is designed to re-- take away from the simple ct that the democrats have no energy polls -- policy whatsoever. let me take that back. actually, they do. their energy policy is to increase the cost of energy. you heard that right. this is the president's energy secretary steven khiu.

"somehow we have to figure out how to boost the price of gasoline to the levels in europe." so the response of democrats is to rail against oil executives to masthe fact tt their policy is actually to make the price at the pump more painful. for all of their talk about the shrinking middle class a the income and equality. high gas prices don't hit warren buffet and warren beate the hardest. they have to hit moms because they have children. when al gore has to pay a little more to gas up the provide jet to fly to france, he doesn't feel any pain. but when my con stitch quenlts -- stitch -- constituents see gas go higher, they have to make real choices. david letterman captured this

current situation brilliant live. gas prices, aren't they crazy? it's so expensive. the reds are carpooling in from new jersey. i'd expect my friend from new jersey to change the joke and say that the rats arrived in the opposite direction. we don't have as many rats in my home state of utah, but like states in new jersey and new york, utahans are plenty angry about high gas price, near $4 per gallon. this is very discouraging because we are still recovering from one of the worst recessions our country has ever faced and all the gas prices has done is put the brakes on an already fragile econom i hear from small businesses that they're trying to make a profit and possibly hire more workers. but no, they have to make room for energy expenses. i hear from those who are still looking -- looking for employment.

what the people of utah and this country need is a forward thinking energy policy that will address rising gas prices that is a lead weightround the neck of the complifment i'm not here to defend any particular industry. m one of the leading pro opponents of promoting alternative fuels. i might add i passed legislation that does do that. let's not gloss over the plan that is being offered here. the plan that is being offered here is to raise taxes. americans are rightly upset about the cost of gasoline and the solution being offered here? let's raise some tax. lawyers would call this a non secretary tur. every day, americans would call it beside the point. it's about as relevant as a person walking into the doctor's office complaining of chest pain

and having the doctor offer to reup holeser the couch. this demands an energy policy, but all this hearing is about is providing a justification for tax increases. i wish i could say i was surprised no. matter what the question is it seems that for the president and some of my colleagues, the answer is always raise taxes. government spends too much. raise some taxes. health care too expensive. raise some taxes. gas prices too expensive, i've got it, let's raiseome taxes. i would be doing a grave disservice to my constituents if i was to ignore the grave con consequences on these gas prices. at a time when we are still recovering from an historic economic collapse. the proposals that will be discussed today e completely

divorced from those pressing needs. the reasoning put forth for repealing these tax provisions, rising gas prices and reporting high first quarter profits would set a bad precedent for future tax increases. are we to raise taxes anytime a company sees an increase in profit due to high demand? what if an increase in coffee results in starbucks recording record profits? what if the hollywood studios hit a few homeuns with new films and record profits result? i'm not going to hold my breath waiting for democrats to call george clooney up here to justify his income. i do not believe we want to go down the dangerous road of deterring u.s. businesses of becoming too profitable.

i'm afraid we're going to see you try to score political points today. i have a chart depicting what i believe this hearing will turn into. there you go. that's a really nice picture. >> bst the horse and who's the dog? >> i think we both know. i know who the horse's ass is, i'll put it that way. i shouldn't have said that. elaine is going to give me heck when i get home. it perfectly appropriate to examine the purpose, design, and intent and effectiveness of tax incentives that promote the production of oil and gas. let's have that detective. in 2004 congress passed the american jobs creation act. the centerpiece was the domestic manufacturing deduction. this provision was designed to

strengthen the domestic mastering sector. it is a deduction for manufacturing everything from coffee to appliances to the domestic production of oil and gas. the amount of the deduction is tied to wages paid to the american workers. the intent was not to incentive manufacturing and production but to manufacture and produce in the united states rather than overseas. congress passed this provision with the expectation that it would provide economic growth and job creation here in the united states. this provision is not just tied to oil and gas and to the oil and gas industry but applies to income derived from all manufacturing within the united states. maybe we should have a meaningful conversation about whether this provision is good tax policy, given that it impacts industries far outside of the oil and gas industry, it is a conversation more

appropriately suited to a debate over tax reform but i'm not going to hold my breat waiting for this adult discussion of tax policy. i know the distinguished chairman haseen trying to do a series of hearings on tax policy and i am personally very appreciative of that and i applaud his leadership. instead i expect some good political theater. the liberal people at nbc certainly had the talking points yesterday afternoon and are ready to make middle hay. many will point to a comment made by a former c.e.o., that oil and gas companies do not need these taxrovisions. that c.e.o. might be right. but let's be clear, they would be less likely to drill in the united states without these tax incentives. we have to ask whether we want to help increase the market

share for the u.s. or decrease that market share and put ourselves at the mercy of foreign importers? i'm not going to wait for the nbc lineup to stand on their hats on an oil rig and ask about the potential loss of blue collar american jobs. we have a great number of resources that be be used in the united states. i plawed president obama's recent pledgto reduce foreign oil imports by a third by 20 20. however, i was taken aback that he told brazil that we want to be their best customers if they increased their oil production. so it's ok for other companies to boost their economy with oil production but wrong for us to do it at home. to be honest, i do not know what the president and his cabinet is

for energy security. and i don't expect to get an answer today. the american people are upset at high gas prizes and are demanding solutions. the president has no solutions. his policies would increase the cost of domestic production and harm our economy. so faced with the uncomfortable fact that the buck stops at the oval office and the president's only solution to high energy prices is to double down on them, liberals hope to distract the american people from their failure to develop a co-heernlt energy strategy. we currently depend on oil for our energy needs because it is abundant and it's dependable. demand is and will remain high for e next decadand certainly beyond that. there's a reason why florida's demand for petroleum based transportation fuels is among the highest in the united states. there's a reason why new jersey

and maryland consume more gaspar capita than most states. and we have the resources to make that demand -- >> senator hatch, are you almost through? you've been talking for a long time and we don't have our testimony yet. >> no, i'm not through yet. but i'm almost through. just recently geologists have discovered in the western part of north dakota and parts of montana a 20,000 square mile sea of oil that could hold the largest accumulation of oil identified in america since 1968. they have dubbed it the kuwait on the prairie. we also have a great deal of oil in the rockies, on public lands and off oucoast but the president has done everything in his power to shut down federal leases in these areas. maybe it's just the people working for him, i don't know. we all know politics is thickn

the air here. our dog and pony will feel very much at home. many democratic snarpts have admitted that it's good politics to taken oil companies when gas prices are high. we all knowo everyone is angry about high pump prices but if we want to do something about it, three questions come to mind and i'll pursue these with the witnesses. will the policies proposeded by the president and democratic leadership cause pump prices to drop? second question, if pump prices do not drop then what will the policies proposed by the president and the democratic little do? one possibility might behat these policies will cause the u.s. to become more dependent on imported oil. the third we request -- question, with respect to tax incentives available for all u.s. manufacturers, is it wise, and this is an important question -- is it wise to single out one industry and treat it

differeny from others? i'll put a finer point on the question. is it wise to conduct business tax reform on a selective and punitive basis? it's a legitimate question and we ought to answer it. let's send the pony back to the stable. that's what we ought to do. let's send the dog back to the kennel. let's get back to reforming the tax code to support economic growth. so far in this congress wee been making progress in making the tax code more first quarter, simpler and fairer and i know that the chairman is dedicated to that as am i. and i hope the chairman will continue. thank you. >> thanks so much. senator. i'd like to introduce the panel before us. our first witnesses is drmplets john watson, chairman and c.e.o. of chevron. second, mr. marvin odum. u.s. president of shell oil company. third, mr. lamar mckay, chairman

and president of b.p. america. fourth, mr. james mulva, the chairman and c.e.o. of conocophillips, and finally, rex tillerson, chairman and c.e.o. of exxon mobil. mr. watson, why d't you begin? you probably know our customary procedure here is have your statements included in the record. if you could summarize, around five minutes. thank you very much. mr. watson? >> mr. chairman, ranking member hatch and -- half and members of the committee. i am john watson, chairman and chief executive officer of chevron corporation. fortunately, our nation is endowed with adunn ant supplies of energy including oil and national gas. each time we come to capitol hill we advocate for measures that would better helm develop our oil supplies.

it's one of the most effective ways to counter rising energy prices and stimulate economic growth. tax increases on the oil and gas industry, which wi result if you change long-standing privesings in the tax code, will hinder energy supplies and it will also mean fewer dollars to state and federal treasuries and fewer jobs all at a time when our economic recovery remains fragile. becae my time is limited i'll make three points. first, the oil and gas business pays its fair share of taxes. despite the current debate, few disease be -- businesses pay more in taxing than oil and gas companies. the wordwide effective tax rate for our industry in 2010 was 45%. that's higher than the u.s. masters at 26 .5%.

between 2008 and 2009, our industry paid or accrued almost $158 in taxes including $9 in federal income taxes. totals nearly $ 6 million a day. changing a tax prives outside the context of a brooder cooperate tax reform would restrain domesticing develop and reduce tax revenues it -- at a time when we are needed the most. raising royalty fees will increase the cost of doing business in places like the gulf of mexico and impede development of these resources just when we're getting back to work. second, long-standing provisions in the tax code parallel tax preement treatment of other industries. for all u.s. businesses a basic tax principle is that there are

figured off -- after costs. the oil and gas industry's expenses are similar to the research expenses developed by pharmaceutical and thnology firms. they allow them to recover the costs of risky designs necessary for their business. some thee long-standing provisions in the tax code. make it ply to other sections of the u.s. economy, including the manufacturers' deduction. we're concerned about the proposal to curb foreign tax credits for duel taxpayers. without these credits, we would pay tax twice on income generated overseas. this would make us less competitive internationally and cost u.s. jobs that support our overseas operations. third point is that there should be equitable treatment

for all formof energy and all energy producers, large and small. i am an advocate for developing all forms of energy and using it more wisely but it's wo wron -- wrong to increase taxes to subsidize other forms of energy. this is also likely to have serious consequences for production, jobs, and revenue. singling out companies because of their jobs is anti-competitive and discriminatory. after all, our five companies are providing the technical, operating and managerial spers that is allowing the global energy industry to operate. the most sensible path is simple -- don't punish our industry for doing its job well. allow us to develop our nation's vast energy resources and strengthen, don't weaken, our

abilities to compete agast large national oil companies, who are major players in the u.s. and global energy oil markets. responble development of our resource sources, will add more high-paying jobs, provide billions of new tax revenues, and reduce our depend ens on foreign energy supplies. if our nation's concern is keeping nevts here at home we ask for here is what we look for anywhere we nevis. conditions that are not punitive and discriminatory mr. chairman, i'm proud to lead a 132-year-old american company, i'm proud of the vital role we play in our economy and i'm proud ofous -- us being able to make significant contributions to our community. thank you. >> thank you. you're next.

>> thank you. i'm marvin odum. president of shell oil company. shell is a global energy company with more than 90,000 employees in 90 countries. approximately 19,000 of those are here in the u.s. working to discover, produce, market, and deliver through consumers today's energy and tomorrow's energy technology. thank you for the opportunity to speak to you today. i'd like to address right up front the issue that's on many americans' minds, the rising cost of energy, particularly the cost of gasoline. because fuels are refined from crude oil, the biggest impact is the price of crude oil. everything from weather to politics and the global economy determines the price of oil a the fuels made from it. weak economic conditions in 2008 and ninth -- 2009 lowered demand, which helped push prices down. now with world economic recovery on the way, demand is on the rise, sending prices upwards.

in addition, because oil is sold in u.s. dollars throughout much of the world, when the dollar becomes weaker, it takes more dollars to buy the same amount of oil. oil is a global commodity. so while we can't predict or control the price at the pump, we do know that we can increase the stability of our energy future through a combination of efficiency gains and increased supply. and the surest way to address a challenge of a this agony tude is to focus on what we can control, using what we know to save guard against what we don't. without question, our government is facing significant channels right now, particularly in terms of economy and -- economic and energy security. but when you face a deficit, choices are usually straightforward. get more or use less and often it's a combination of both that achieves the best results d there are choices on how to get more.

it can be temperaturing to assume there's something to gain by taking more from a few. however, one must balance the implication of increased industry cost on both supply and the cost of fuel. the opportunity in front of us is to put policies in place that allow the energy industry to become an economic growth i think -- engine for america. developing our own resources, we would see tens of thousands of new well-paying jobs and many billions of dollars from revenue for local, state, and federal governments. last year, shell reported global earnings of $1.6 billion. we also nevised some $29 billion, mostly in new products to bring energy supply to the consumer. we spent more than $40 billion to run our existing energies worldwide. last year shell deferred some $700 million in capital

expenditures. we expect to lose an additional 50,000 barrel ive lenlts a day as a result of that. it represents lost gasoline production just to shell that couch powered on average 6333,000 cars and light trucks every day sincjanuary 1. here in the u.s. at the invitation of the federal government, we have invested more than $3.5 bilon since 2005 to develop -- develop energy resources in alaska. six yes later we've been presented from drilling a single exploration well due to the government'snterference. during that time we have drilled more than 400 exploration wells worldwide. nevts in our industry carry huge amounts of capital and risk.

policymakers must consider this when thinking about the competitiveness of the u.s. the president recently acknowledged that reducing certain imports was a national policy imperative. we agree. the u.s. is resource rich in any ways, especially with oil and gas. the bottom le is if we don't develop our own energy sources we will have to accept the cost, both financial and geopolical of bringing it into this country from places that can be less secure and stable. in closing, shell is grateful for the widespread recognition in congress of the daunting energy challenge facing this nation. althoughome -- some of our opinions differ, we stand ready to work with you on developing a more secure, affordable and efficient energy supply for this nation. thank you.

>> thank you very much. mr. mckay? >> thank you, mr. chair. ranking member half and committee -- members of the committee, good morning. i'm pleased to address energy incentives today. last marc month marked the one-year anniversary since the b.p. accident and b.p. continues to work very hard to compete our commitment in the gulf. i'd like to provide a little bit of context on b.p.'sevts in the u.s. on traditional and renewal industry. we are committed to providing the u.s. with energy it needs to ow in the coming decades. doing so and a spot -- ing so in a responsible manner. largesthe nation's

energy investors. over the five years ending in 2009, we have invested more than $37 billion in development of u.s. energy supply. we continue to invest in natural gas production from the rocky mountain west and ourxisting shale gas regions. we have significant oil production in alaska. we have made significant investments in our refineries in the u.s., including major capital projects at our key midwestern refineries. we also inve actively in renewable energy. during 2009, we invested nearly a billion dollars in alternative energy. these investments include the operation of wind farms in 10

states, development of the first commercial scale biofuels facility in florida, and work on advanced biofuels molecule with dupont. we have our solar business, which has been in operation over 35 years. bp supports a comprehensive energy policy that includes all forms of energy, inclung oil, natural gas, coal, nuclear, biofuels, wind, and solar, and encourages conservation. even with major improvements in energy efficiency, and the rapid growth of biofuels 20 years from now, the united states will still depend on oil, natural gas, and coal to meet more than three-quarters of its energy needs. on the supply side, we support properly scaled transitional

incentives for alternative energy, but raising taxes on one form of energy to encourage production of another will reduce industry's ability to keep up the growing u.s. energy demand. the result could be less investment, less production, a tighter ergy markets, and over time, at higher prices for consumers. instead, our nation should be encouraging production of all forms of energy. on the demand side, energy policies should encourage conservation and helped drive energy efficiency. the energy challenges facing the u.s. are enormous. the impact of high energy prices on the overall economy and the american people are very real. we cannot change the international crude oil market, which tries those price -- drives those prices.

but we can wor with the congress and the administration to move toward greater energy security and lower carbon energy future. congress establishes the rules regarding energy and tax policy. companies take those rules io account in making their investment decisions. because of the long-term nature of the significant capital investments that are required to develop and produce energy, a stable and competitive tax framework is critical to the united states, reining attractive in the global demand for capital investment. the currently contemplated changes to the tax rules would let the resources companies like bp have to invest. not only in conventional energy production, but also a new and emerging technologies. you're serious about building a

sustainable, profitable, alternative business capable of delivering clean and a portable power. at my companstands ready to work with you and others. thank you. >> thank you very much. >> good morning. my hope today is to bring clarity to this vital debate on tax policy regarding major oil companies. there is a great deal of misinformation about our tax liabilities. unfortunately, it has been used to justify further increases. my objective is to convey first the realities of our current tax burden and the negative impacts of new proposals. there would be in? to our company, our indusy, american consumers, u.s. job

creation, and national energy security. let's take a look at what we already pay. it shows the effect of a worldwide tax rates. there are a lot of familiar names on this chart. the group paid 27% for the years 2006 to 2010. look at those three in red. >> i cannot read some of those. >> walmart, berkshire hathaway, apple, intel, microsoft. >> and it is done at the bottom? >> general electric, the horizon, coca-cola. >> at the top, conocophillips,

followed by the two international american companies. the three major u.s. oil companies already pay the hiest tax rate in the top 20. keep in mind that this is after taking the allowable tax deductions and credits. what does this mean in our dollars? for our company, we earned $11.4 billion last year. we paid $8.3 billion in income taxes as well as $3.1 billion and other taxes. car total worldwide taxes paid to declare income. any fair minded person would lily agree that we pay our full share. companies like ours carry the flag of u.s. competitiveness into the battle of global business. every day we fight for access and opportunities around the world. are rivals are typically nationally owned companies from other countries and they

literally dwarfs us in size. some are dozens of times bigger than we are and they enjoy support from their government. despite these compelling numbers and the need to maintain a competitive u.s. oil industry, some would have us pay en more. one proposal wld only impact the three major oil companies that already carry the heaviest burdens. further restrict the foreign tax credits that arevailable to us, seriously undermine our ability to conduct our business internationally. but we decide how much to bid fo foreign energy opportunities, we have to include taxes and the total cost. overseas companies with lower tax obligation outbid u and when the opportunities. unfortunately, this does impact u.s. jobs. we operate worldwide and we have

29,000 employees and 20,000 here at home and go some of them work to support what we do internationally around the world. read this in our foreign tax credits will have a cascading effect on our business. we will this project and opportunities to foreign competitors. our u.s. job creation, investors would suffer. as profitability declined, it would reduce our ability to invest in domestic energy. a ultimately, we could even see more energy and development conducted by foreign competitors. it would spend -- it would send dollars back to their home countries. we hear a lot about the so- called tax subsidies down coat this calls for another reality check. the major companies do not get

subsidies. some deductions and credits available to the indusy are not allowed to the three major companies. the ones we are allowed mirror those available to all u.s. companies. even in these cases, the law limits how much we can benefit. that hardly sounds like a special industry subsidies. compress often speak -- congress often speak of enhancing u.s. competitiveness. but this would be very counterproductive. it would penalize u.s. workers and the american public that invest in our shares, and they would on the well-being of companies that must carry our country into the energ future. th certainly cannot be your intent. i urge you to objectively and passionately considered the facts and reject these unfair and unwarranted tax proposals. thank you. >> thank you

>> i appreciate the opportunity to address the topic of today's hearings. all of us here today recognized the strai of high gasoline prices imposed on many americans. during difficult economic times. we owe it to our customers and to your constituents to address the topic of energy prices and taxes and aopen, honest, and factual way unfortunately, the tax changes under consideration the target of the five u.s. companies represented here today failed to honor those goals. it isot simply that they are misinformed and discriminatory, there counterproductive. but undermining u.s. competitiveness, they would discourage future investment in energy projects in the united states a therefore undercut job creation and economic

growth. because they would hinder investment in new energy supplies, they did nothing to help reduce proxy's. there is a more effective way to take steps. unfortunately, it is a way that congress and the administration has rejected great if we were developed -- has rejected it. it would put downward pressure on energy prices and increased revenue for government budgets. working together, industry and government can achieve our shared goals. i would like to offer several important facts on the specific tax proposals under currently being advocated by some in washington. it is important to make clear that tax provision such as the section 199omestic production activity are not special incentives. they are standard deductions

applied across allusinesses in the united states. section 199 applies to all u.s. domestic producers and manufacturers, from newspaper publishers to corn farmers, to movie producers and even coffee roasters. all can claim this deduction. by any reasonable definition, it not an oil and gas industry incentives. we are limited to only a 6% deduction, while other all u.s. manufacturers are allowed in 9 deduction. didn't ignite a select few companies within the oil and gas industry the standard deduction is tantamount to job discrimination. why should an american refinery worker employed by a major u.s. oil and gas company in montana be treated as inferior to an american movie producer in hollywood and an american newspaper worker in new york's

wore an employer of the foreign owned refinery in illiis? another tax measure that is misleading can be labeled -- is the foreign tax credit provision. this provision applies to all u.s. companies with overseas in, and as been in place since 1918. it is meant to protect u.s. competitiveness abroad. again, u.s. oil and gas companies are alrea treated differently than other businesses under this provision. it includes unique and prescriptive rules on our industry requiring us to prove our foreign ta payments are indeed income taxes and not realties. if these rules were changed, our foreign based competitor is on a full range of foreign governme owned oil companies would gain a cigna vacant

competitive advantage. -- would gain a significant competitive advantage. they are enomy wide, it generally available deductions and credits under the tax code. removing them for a select few is nothing less than discriminatory and a punitive tax hike is jeopardize the jobs of american workers. doing so would do nothing to reduce the prices americans pay at the pump. gasoline prices are primarily -- bayer said in e marketplace by global supply and demand, not by companies such as ours. furthermore, punishing five u.s. gas and oil companies would generate far less government revenue and if we were allowed to compete and produceur nation's resources. in august 2010, 10 to $17

billion in this country is at risk per year if the section 199 is repealed for our industry. another study found out that opening up federal lands could generate 400,000 new jobs by the year 2025. another analysis shows such actions could generate as much as $1.70 trillion in government revenue. raising taxes on five u.s. oil and gas companies is simply not the way to reduce prices or raise revenue parade increase in ese companies taxes would only discriminate against certain u.s. workers and make our companies less competitive. a much better solution lies in permitting our industry to increase energy supplies, including supplies found here in north america.

access, not taxes, will enable us to meet our goals. exxon mobil shares these goals and we look forward to working with you to achieve them. thank you. >> thank you. gentlemen, we appreciate the time -- you taking the time to come here. let me tell you my perspective. as chairman of the finance --mittee, we've got to find we've got two ways to reduce our annual deficit and debt. it is not an easy task. to do so, we have to find an approach that is balanced across the board. find a fair solution. one shared by americans tbe

pretty fair and balanced. what you said is true, you do pay high taxes. that is true. it is also true that your foreign taxes are higher than your domestic taxes. your domestic tax rates is quite a bit lower than year worldwide rate. it is also true that the price of gasoline is determined primarily by the world price. that is the primary determinant. it is also true that when the world price goes up, the after- tax profits of your company's go upery significantly. your cost do not go up as much as the world pce has gone up. your profit margins go way up,

that is true. it also seems to me that based on the evidence, according to your financial report, if your average cost is roughly $10 a intangible you add ain drilling, it goes up to $20 a barrel, but your after-tax profits would be about $72. your gross revenue is much higher this year. this is not a matter of singling ybody out. it is not based on your subsidies, is based on the price of crude. maybe a fair way to get at reducing our deficit and debt is to eliminate the tax breaks

which toot have much an effect on your decisions to produce. itoes not have much effect because your profits are so high. according to reports, exxon mobil after-tax profits go up to $375 billion a year. your after-tax profits built up a billion dollars. altogether. subsidies we're talking about here, there are $21 billion and break that down to a quarter, that is 5 ended million dollars. -- $500 million. this is rough.

if the price of oil were to go down $2 a barrel, that would be more than the elimination of these subsidies. these subsidies do not have much effect on your decisions. your rate of return, different locations, that has a much greater effect on your ability to produce. tell me what is wrong with my analysis. it seems that you're making a lot of money. it also seems that the subsidies are not really that necessary anymore. many of them were given many years ago. 199 was the aftermath. it was intended to give american companies and export break. congress passed 199 for

everybody. it was kind of a get, 199. other companies do use it for export. you do not as much. it seems to me that as we try to get our deficit under control, and oil prices are so high, and because your subsidies are so low, the increase in crude oil prices, you do not need it near as much as one might initially think. >> to the couple of quick points. if you look at the waist to impact the deficit, the way to

impact the deficit and get more money into the federal government is through more production. we pay more bonuses for the access, we pay more royalties on the production, those numbers are much larger than anything we're talking about that is the way i think to impact the deficit. i did want to comment on your production cost chart. i think in this is a pretty important point. the investments that have to be made to produce oil and gas adds to the ongoing production costs. the time line from when those investments starts to wind up production starts to happen. the other piece you miss is that it looks at all the existing production exist across the country, i would assume, but the cost of future production is not the same as the cost of the stark production. it is more expensive. >> anybody else?

>> i think it is helpful if we talk about the past or the future. a lot of the numbers you are notlaying -- they're entirely accurate. they're really talking about things in the past and what we have already done. we invest in resources that deplete, so we constantly must replace those if we want to have a sustainable biness. we've been around for almost 130 years. that is what we haveeen doing for more than a century, taking the revenues from the past decisions and finding ways to invest that to replace the barrels are depleting. if whave to go out and find and locate those replacement barrels, they're more and more difficult to find. the real question is not, can be enforced -- can we afford more taxes?

that is not what we're doing. we are sustaining the viability of the enterprise for many years to come, so we have to make a very large investment. the real question -- what did these tax changes mean to that next investment decision that we're going to make? that is made on in assets by asset investment by investment basis. if i want to look at a shell oil police in north dakota, i have to run the cost of acquiring those leases. i have to put the tax burden on them. you give me a different tax burden, my combat it -- i do not get to develop at least. i will take my capital since the u.s. is not attractive and i have to go somewhere else. offshore, you want to raise the incremental cost of development. it is that marginal beryl that you were going to take out of our system. >> i wish i had more time to talk.

my time has more than expired. >> thank you, mr. chairman. president obama and numerous congressional democrats have proposed raising taxes on the united states oil and gas production. in an article from tuesday, mendez and knowledge of the legislation was slated for a vote next week. it will not do anything about gas prices exceeded it in $4 a gallon in some places. with rising taxes, will lower the gas at the pump? >> raising taxes on producers

raises the cost of crude oil and the cost of crude oil is the prime ingredient in the price of gasoline. raising taxes will not reduce the price of gasoline. >> ok. do you all agree with that? >> i certainly do agree with that. if the production year and the united states, you do not have access to it or it is disadvantaged, that move somewhere else. therefore, the jobs move somewhere else. the trade benefits move someere else. >> ok. >> i do not believe that raising taxes will lower prices. i do think the important thing is to have a competitive fiscal environment to attract investment, more investment can raise supply and have an effect on prices. >> raising taxes will lead to less investment, less

production, and higher cost per gallon. less employment. >> beloved little immediate effect -- it will have them -- it will have little immediate effect of fact -- a fact. it puts more pressure on refineries and they are already losing money most quarters. it will lose more refinery capacity, it means more imported products rather than refined product here. >> my colleagues in the state of new jersey introduced a bill that would increase taxes on the top five oil companies. he said that these so-called subsidies only benefit big oil and ceo' i would like to point out to my friend that actually, corporate management only makes up about 1.5% of the shareholders.

there is a chart that is showg -- this shows the top 10 holdings of the new jersey public employee pension fund. as you can see, exxon mobil and conocophillips are listed among the top 10 holdings. with increasing taxes on your company affect your earnings? >> increasing taxes and would have an impact on our earnings and ultimately on the value of our companies valuation and the shared performance to our shareholders. >> and all these pension fds. new jersey is not the only state with pension funds. >> that is true. if you take all americans and retirees and employees, and if

they are involved in one way or another, they probably are shareholder in an oil and gas company. >> to agree with that? >> raising the taxes would affect our cash flow. the ability to pay divides. it can affect the overall cash flow and financial management of the company. >> one last question, i am sure you are aware of the united states has the highest statutory corporate tax rate. according to a database that collects information from company's financial statement, the industrhas an effective tax rate of 41.1%. other industrial companies have a tax rate of 26.5%. yours is a very high tax rate. all the tax increases we're talking about would eliminate incentives to produce oil and? -- while and gas within the

united states. did these tax increases encourage you to produce coal and gas? outside the united states rher than doing in here? anyone can answer that. >> certainly, tax is a big cost of doing business for us and is considered in all decisions that we make. to the extent that taxesre higher in the united states, we will look elsewhere. with all the provisions that had been considered, it will make it more difficult for us to do business. it will raise the cost of doing business. it will produce less in revenue, fewer jobs, and did against the president's agenda. >> my time is up. >> thank you, mr. chairman. this is not the first time that congress has dealt with this issue. five years ago, the suit are

serving as ceo's of your company were passed -- were asked whether they agreed with president bush paused statement. $55 oil, we do not need incentives for oil and gas companies to explore. conditions today are pretty much like they were in 2005. recordrofits, a price hikes, but certainly above inflatio you were at the hearing and would i would like to do for the committee, we played a portion of that hearing were the oil company ceo's said they did not need incentives from the federal government when oil was at $55 a barrel. could you just showed that video briefly? >> would $55 oil, we do not need

incentives to oil and gas companies to explore. there are plenty of incentives. today, the price of oil is above $55 per barrel. is the president wrong when he says that we do not need incentives for oil and gas exploration? if i could have a yes or no answer. >> no. i do not think our companies asked for incentives for exploration. >> agreed. i said we do not need, but we do need access. >> just a yes or no. >> yes. >> correct. >> yes, yes. >> the reason i wanted to get into this is today's conditions

are much like they were into a dozen 5. that is why i mentioned the profits. with respect to oil and gas production, we do not need incentives. oil is now right around $100 a barrel and my question -- if your company did not need incentives to drill for oil at $55 a barrel, how in the world can you possibly need incentives when oil is at $100 a barrel? >> at $55 -- we look at the past. the easy to find oil has already been found. taxes have gone up trade quarrel is more challenging to find.

-- taxes have ge up. the oil has more challenging to find. we do not give the items that we e talking about, foreign tax credits, section 199, we do not view those as subsidies. we've you those are a similar types of provisions that are made available to other companies, all industries in a similar way. we do not need incentives to drill. >> i am talking about industry specific incentives. percentage depletion, intangible drilling costs, deal logic and geophysical costs, these are industry specific incentives. you said that you did not need them in 2005. markets were global into a dozen 5, it's just as they are now. i cannot understand how even if

you account for all of the possibilities in the world, how you can make the case that you need these industrypecific incentiv when oil is at $100 a barrel. >> intangible development, w view these similar to research and development, technology, similar types of provisions that are made available through other industries. >> those are industry specific incentives. >> theare very similar to what is offered to other industries as well. >> you also get the research and development credit as well. your predecessor at chevron said that he did not need incentives at $50 -- at $55 a barrel. >> i would like to offer several comments. you talked about percentage

depletion. these companies are -- perhaps there is so -- there is some confusion about wh we are eligible for. >> we're talking about industry specific provisions. that is what the president was talking about. that is what i am talking about today. he just said incentives and to you all sd you did not need them in 2005. there seems to be a different story today. >> we are not eligible for percentage depletion. >> you are eligible for a lot of incentives. >> we have seen cost rise dramatically in our business. any number of industries would tell you that the cost of doing business has more than doubled. we are not asking for special treatment, we are asking forhe same treatment to other industries. >> if you look at what the congressional research service has said, and they said that recently, you will continue to go way beyond inflation in terms

of your costs. if you took inflation-adjusted prices today, the price of oil is higher than it was into it doesn't buy, that is adjusting for inflation today. >> thank you. >> thank you, mr. chairman. i welcome all of you here today. i feel like i was in a time warp. i was there as well in 2005. the greatest travesty for this country is that we do not have an energy policy. i do not know how many energy crisis there has to occur in more than a generation to prompt and compel the president and congress to develop a comprehensive energy policy. it has transcend -- it transcends many administrations. if the hearings did not result in action, increasing debt

policy, we let down the american people. we should be examining all aspects and all facets of what we do at. we suld examine allhe subsidies d all the tax incentives that we provide. we put many of them on cruise control for so long. the challenge that we're facing today -- we of not looked at them in terms of their effectiveness. we need to have the energy policy. the congress ought to do eight and that is why people are asking. i think that is an abject failure without question. the real issue for us here today is to address these effectiveness of the tax incentives that you are given in your industry. you provide a very basic commodity to the american people. in my state, they paid $3,500 for oil and electricity and

another 600 critics 6 $200 for gasoline. their pay in the third highest consumer bill. we have to look at everything in terms of what we can do to mitigate those prices not go back into a dozen 5, -- mitigate those prices. oil has gone up 87%. gasoline was $3 and now it is more than $4. what can you tell us that we can tell the american people how effective these benefits have been to your company in helping to mitigate those prices? there was a report that was done for the american petroleum institute last august and it talks about removing these taxes that would alter the break-even point for oil.

if oil is priced higher than $80, the removal of these incentives will not result in any lost oil production. is there a point at which we remove these incentives, a price point beyond $80. i would like to have your response to that as well. first, what about the effectiveness? what can we tell the american people? how are they benefited? that is what we have to examine. >> i understand some of the concerns. in california, we have very high unemployment -- we have very high gas prices and a very high unemployment rate. the policies that we have had

over the last decade have provided some benefits in terms of u.s. oil production. last year, we did increase will production because the open deck acreage to development and we had a stable tax policies in place. what we have seen recently is that we have not conducted -- we have had a moratorium on drilling and you're contemplating tax increases that will only new production in the other way. some of the studies and i have seen indicate that the impact of a $5 billion increase on our industry would have a dramatic impact on production going forward. they talked about a reduction in production of some 400,000 barrela day. that is the dilemma that i think we have been we think about increasing taxes othe producers in this business. >> even in the context of

record profits? >> we make about 6 cents on sales. we make about 6 cents a gallon on gasoline business. if there is a big concern about gasoline prices, federal and state governments make 50 cents a gallon. >> i could not agree with you more about needing a long-term energy policy. we have to get to the fundamental issue here, which is something that has to be addressed. you need a real strategy to execute to do that. has the current tax structure held investment? we are in a position today where the u.s. is competitive. we have made about $3 billion and gear in in come from just the u.s. and we have invested about $6 billion a year in capital projects for new energy projects. that shows you that this

business is competitive. the issue and to address the more fundamental issue, to provide more access, bring more production online. i can give you a very clear example. it the look at offshore alaska, the university of alaska has done some studies there, it is an enormous resource potential. of the estimated number of jobs associated with developing that resource is over 50,000 for a multi decade. of time. the amount of revenue that would come from developing those resources is something on the order of $200 billn. there is a real opportunity, but we have to take a longer-term view. >> thank you very much. >> thank you, mr. chairman. thank you for coming. one of my colleagues suggested that this hearing is nothing more than a dog and pony show.

you would have an easier time convincing the american people that a uniform just flew into this hearing room that these big oil companies need taxpayer subsidies. that is a real fairy tale. the averagamerican family in dallas at the gas pump across america and being asked to sacrifice because of the budget deficit, certainly does nothing this is a dog and pony show. i would like to ask my colleagues here about the question of priorities. we sit in different seats than you do and your job is to maximize what is good for your stockholders and good forour employees and be all understand that. we have to to his priorities in right now, we have a huge budget defit. many have said that the budget deficits says we should cut aid

to students who need to go to college. we should cut cancer research, we should cut a homeland security investment funds. it boils down to priorities. we have to get the deficit to a certain level and we have choices. i want to ask you, did about your priorities. do you think that your subsidy is more important than the financial aid we give to students to go to college? could you answer that yes or no? >> that is a very difficult question. >> we have to weigh those two things. we have to wait because we have to get the deficit down to a certain level. if you had a choice of one or the other, which would you choose? >> senator, that is a choice

that legislative leap you will have to be making. for our company, we are asked to provide energy in an affordable way for the american public. >> you would choice -- you would choose the oil subsidy? that is what you're telling me. most americans, even those who worked in the oil industry, would probably agree with. your company put out a press release yesterday. here is what the headline was. conocophillips highlights solid result and raiseconcerns over un american -- are they gonna -- are they on theamerican, too? >> nothing was intended artfully

or anything like that. r. release specifically refers to tax proposals. >> i want to ask you a specific question. do you think anyone who advocates cutting necessities is unamercan? it was released that sent its. yes or no? >> maybe you could hear me out. it is a very important question. >> do you apologize for it? >> make no miske, were these proposals enacted, if they were enacted into law, they would place the u.s. companies -- >> i have limited time and i know your vi on the issue.

did you consider it on american to have a different view? >> proposals under consideration are going to have a very adverse impact with respect to energy policy. >> sir, there are many people disagree with that not " you have your point of view and that is why you are year. do any of you others consider it unamerican to be against the subsidy that you areor? >> thank you, mr. chairman. >> very difficult to follow the unicorn from york. [laughter] who has a very sharp corn. are you all right about there? [laughter]

sometimes a unicorn can morphed into a rhinoceros and you do not want to mess with eight rhinocos. i met with a young man yesterday's new was the manager of a small exxon refinery. partly owned by citgo. he was seriously concerned about his job security and his other employees working in the refinery because of the legislation seeking to repeal 199. because this refinery is partially owned by citgo, a repeal would not the fact his interest.

i call that unamericna. why would be taxing the u.s. company and letting him do his thing and not -- in central america. there might be some confusion when some of my friends claim that removing these tax expenditures will not have any impact on the domestic oil industry. why would this young man think differently? has the refining sector read scene is much profitability as the oil exploration sector? our jobs juliet risk of these taxes are revoked? >> if you look at our own refining operations, refining has lost money five of the last eight quarters. we made some money in the first quarter and lost money in the fourth quarter. it gets back to what is the price of gasoline.

it is fundamentally the cost of the crude oil. we are one of the largest refiners in the world. we produce about 2.5 mil.5.5.5.a purchase every day to feed our refineries. when the cost of the oil is high, the refiners margins get squeezed. refiners to struggle with very thin margins, so when you increase the tax burden on the refiners, you erode his margin. when you lose money five added eight quarters, it is pretty skinny already. >> i appreciate your answer. it was my marching orders -- now a and understand, to present the statement by a -- i have one

minutes 37 that i will yield back and i would like permission to express his statement at this point if that would be permissible. i do not want to tread on anybody's time. >> bill add. -- go ahead. i will skip a beat thank you's. he goes into how important this issue is, a multitude of areas impacted on the cost of gasoline, that we do not overlook the main factor. 70% contingent upon -- it is easy to understand any

fluctuation in its global supply and demand. he goes into the fact that we are already reliant on foreign cotries and this commodity is traded on a global scale. increase production cannot serve as an immediate magic bullet for solving rising gas prices, but it is a strong start. he supports the domestic explorion and drilling and to fight against our 9% unemployment rate. while they pursue any policy that is counter to any job creation? he indicates that the proposals would be counterproductive. he has a video.

i am not a video man, but we have a video. over already. >> there is no other senator. >> i appreciate that. we were not joined at the head. if we could play this thing and i will be a lot better shape with my colleague. >> it is only 30 seconds. >> 30 seconds. here we go. >> you are right in front othe television. >> could amount to twice the reserves we have in the united states. when you are ready to start drilling, we want to be one of your best customers. >> that was 30 seconds.

the president calledor reducing foreign imports by a third. there is a serious discontent and that is the comment that i truly appreciate. i appreciate your lenience and your treatment of this poor minority member. >> thank you, mr. chairman. i know the subject of this hearing is about tax subsidies and the effect on the deficit, but i would also like to get your opinion on this issue on the price of oil because many americans are feeling the impact at the pump. his testimony talked about how oil is a global commodity and that oil companies are price takers not price makers. i am assuming that people agree with that generally would that statement. what role do you think excessive

speculation in the futures market is having on elevated oil prices? i know that some of your colleagues -- youalked about speculion and a weakening dollar having more effect than supply and demand. can you commentbout speculation? >> it is very difficult to precisely say what impact it has and is also difficult to separate in the marketplace speculation and risk management. the two are quite intertwined in terms of how people manage the rest of the price of the fuel, whether there are -- whether they are a consumer or producer. i would give you one benchmark. immediately after the libyan outbreak, within the next d, the price of oil went up $12. it nothing had cnged in the

global supply the next day, but what was the market reacting to? it was reacting to some level of insecurity about what the future supply was going to be. that is people pricing end -- in what they believe their costs is going to be some time in the future, a building in their concerns and their worries about other possible supply disruptions and the ability of the market to respond to that. as people see how the market response, it just back. >> what you think the price would be today if it was based on the fundamentals of supply and demand? >> if you were to use a pe economic approach, it would be said at a price to develop the next barrel. >> what do you think tt would be? >> it is pretty hard to judge, but it would be -- is gone to be somewhere in the 60 or $7 range.

if i had access, that is the assumption, to the next marginal beryl, what would it cost? as -- as a design developed that, the next barrel goes up. the dustry has done a very successful job omitigating facts through technology advancements, and efficiencies, the things we have learned how to do better to keep the cost down. in a purely economic -- if people did not risk manager it would be set at the marginal cost of the next. >> 60 or $70 a barrel sounds pretty good today, i can tell you that. oil dropped 5.5% yesterday. lastly, it was 8.6% grade i do not think it has to do with the

dollar orhether it has to do with a lot happening and the volatility of the market. i curious as to what you think that the volatility, what we should be doing about the volatility? >> some of the factors that i mentioned are clearly factors. either one may be dominant in the current week we're talking about, but all thosere very real factors on the price. on the topic of trading, i am anything but a trading expert, but it has been studied many and -- many times. tried to understand some of the questions that you are asking. what is the increase in price thatan it does serve a very important function. >> with 70% of that market now

being made up of speculators, that it is going to have been the market made up of people who legitimately have to hedge dominated by 70% of people who are just getting in on this oil gain. that is a problem. do you agree? is that ok to ha the market dried up? i see you smiling. do you have any comment? >> we are not traders. we are physical buyers and sellers of barrels. the market decides based on their view of the teacher.

it is been $8 a barrel of tonight. during my career. >> i'm not sure that is how they were established. these are not the end take years. thank you. >> thank you.

>> i really appreciate them spending so much time on their research. even if they are prescribed to a comedian. they are being hit really hard. i am sure my colleagues will be happy to tell taxpayers what he supports that. i agree about the dog and pony show. these companies on average are making about $25 billion projected this year.

only in washington they would be eliminating those tax increases. i am glad i did not hold my breath for that. calleday's your company proposals to eliminate wasteful oil subsidies on america. do you make those accusations lightly? they are co-sponsors. t think that president obama is an american a cassie has the subsidies? we have expressed cutting oil subsidies. >> there was the title of our media. it is not intended to be personally directed to you. it was merely utilize in a way

that we felt the tax proposal was under consideration. it was inconsistent with the treatment of all taxpayers and to highlight and select five different companies. >> if you believe that the proposals, which to classify them as un-american? i think that is beyond the pale. i was hoping he would come here and apologize for that. are you willing to apologize? >> you are not willing to apologize? >> the tax ones were under consideration. they were inconsistent with out

that energy policy. they are unwilling to apologize. last year, eco phillips spent $4 million buying back its own stock. it helps raise stock prices. this seems to me that they could not simply buy back more. >> we have announced him in e neighborhood. it equates to the sale of the interest. we thought they were not as great. they were better treated than their own. they took the profits.

he put it in the hope. as for tax payments they get a u.s. foreign tax credit. how are they not? those are rossi payments. >> they are paid to the government. they must prove that these are

income tax payments. the house 35 auditors. they look at these very thoroughly. we must prove that they represent income taxes. if you pay as a structure, the irs is not have a lot of opportunity to dispute that. if you divide your agreement in such a way that having the payment of royalties be attacked, you get a deduction here in the united states. that means u.s. taxpayers are subsidizing it. i find it hard to understand how you can come here to the american people. you simply cannot do it. the market is driving the to exploration. you did not need this to pursue

this. somehow the loss of $2 billion a year means the only make $123 billion in profits. it is still punishing. somehow unique to go back at them to make it operate. it is hard to understand. i really thought you come here and a different context. you are really surprising to me. i am shocked that you are not willing to the knowledge that your company statement is also the only passing an aspersion upon all of us. >> thank you. i think all five of our witnesses for being here. i think the best thing we can do is have a growing family was

stable energy prices. i do not think they have less to do with the ability of the pension system. the math here is so overwhelming. i do not want to say that 4 billion is insignificant. it is a small amounts of money. i thinke have to put this in the proper context. it seems to me this is one area we should be able to reach some common understanding. the long-term impact will allow

us to make sacrifices. there is a reason why we are looking at this. we had championed this. that issue is the supply of oil globally. that is with government and transparency. the countries are incredibly ploy report. -- are incredibly poor. it is used in many cases to define this. it leads to the instability of when you have systems that are not transparent. people will stand up to that.

we have an unstable supply causing investors to put money there. we have been looking for some time to support the transparency initiatives. many of the oil-rich companies do not participate in these industries. we were successful in getting part of this. it is being related to the sec. it is being paid by the oil and gas companies to other countries. then we can have more transparency in better government. the industry has been helpful for us?

there seems to be a reluctance a this applies to all companies. we have friends in europe and other countries that want to see this worldwide. then all companies will have to disclose these payments. time they paid to other countries. we stood up to that. we knew this is not in the u.s. long-term interest. i would like to get your response. we can get more stable countries around the world. it is in our interest. we need your help. i am curious as to why we seem

to be at odds on this issue. we hope that you comply and help us make sure this is implemented in a fair way. this is the reason why i directed the question. >> i appreciate your comments. it is pretty clear that we support the intent of transparency. we were quite hard the various initiatives. some of the comprehensive and cut that we have tried to get is that we try to do it in a way that the stop force them into an uncompetitive situation. it recognizes the challenges we have in terms of searching out that balance. there are complications associated with it. we try to get to the right answer.

we have exclusions. it seems to me that we are in complexed with the standard contract. >> the bike and offered a couple of comments. we have been very active. we have a comprehensive human rights policy. we are forcing u.s. registrants. this is required under the law. it is very one-sided. >> work with us and everyone has this. there are friends around the world that want to work across the nation.

>> it is interesting to observe this. i cannot think you for lots of other things. i get the feeling that it is almost like the five of you are like saudi of arabia. you are caught up in your profits.

you are out of touch. it is with the american people. i do not think i can blame me with that. the nature of your travel and the size, i do not think you have any primary idea of what the scientists of this does to the american people's willingness to accept what you have to say. i think you are really out of

touch. they will cut this and have there are all kinds of things. i come from west virginia. i care about hedge funds. a lot of things will take enormous guess. my guess is that you will be able to protect yourselves. of companies have been able to do this through friendships and lobbyists. you are able to prevail. you've seen me will prevail.

it increases the details between us of india. i do not know how serious you are about this. we were terrified appear. we have a meeting with the president yesterday. it means all kinds of things just happen. let me stipulate that. i think you are out of touch. we are deeply committed. we share nothing. if the share nothing, you are slow. if you give up something, what have you, that is the rest of it.

they may be point about the $55 a barrel. now your at $102 a barrel. you talk about moving overseas. how much profit to you have to make to not be needful of the subsidies? you say your life depends on it. you would not need the subsidies at some time. we have a reasonable return. i do not think the american people want shared sacrifice.

do younderstand how out of touch that is? we do not get to share prosperity. we are unable to work today. they feel this. your federal tax rates are substantially, 3% lower than what the average individual tax rate is. does that appeal to you? it has to be dealt with in a very large way. we are well aware of it.

it was 32%. it could be a low as the sine digits and as high as 39. we do not settle our taxes in that year. we are recognized in the air we file. we recognize cloning -- closing of our issue. your tax rate was the best. theirs was about 20%.

that leads into the next round of questions. >> thank you. we appreciate all of you coming here. this is about our priorities. we have a responsibility to meet everyone. they are experiencing as tobacco questions and determine priorities. this is our job. it was 1960 -- 1916 when one of these were put into place. we were drilling. it iroughly 15 to $17 a bill. banks have changed sincehen.

it is healthy to look at whether or not when we were developing then, it this a hdred dollars or more. it is very different. it makes sense for them to subsidize. it subsidizes what you are doing. there is not enough competition. they can choose not to pay. people are extremely concerned only have to make choices. the question i would have is

looking at the last three months. they enjoy corporate pfits together. ther is one cermet to 2% of the profit. you have massive profits. taxpayers to keep providing 1% to 2% of your profit. my question is thopposite. he wl bring the gas prices down. >> it is not a subsidy. it is a legitimate deduction.

what would it take? the ruling cost structure, the structure to incentivize and help people go out invest in the next supply today it is largely coming from the resources. >> i'm trying to answer a question. he may get a higher. 2% at wes turn to are talking about. we are looking at the site turned to look at it. we have to make choices here. what is affected? what works? it is not credible to say that

we are going to raise gas prices because we are asking you to forgo one to 2% of the process. we are held hostage. we take away 1% to 2of your profit. that cause you to raise their problems. what will give you the lowest? they will cause you to raise prices. how much more do we have to get you? >> i did not say we would have to raise them. there was a real threat here. >> they wa to solve this by getting more there. it would generate additional revenues.

this is the role that the structure pays. -- plays. >> i appreciate that. we have to decide where is the most effective place to invest dollars. my people what to expect every single dollar. how much do we have to give you an order to bring prices down? we are not asking for tax subsidies. we are asking for subsidies. we have to start drilling. with more drilling we will create jobs. that is the best thing we can

do. >> we are hoping they will be able to do that as well. i know i am out of time. >> we are not asking for subsidies. it cannot be consistent with increasing investment. thank you. >> it is striven the u.s.. this will drive us there. this is simply to look at the enormous opportunities the u.s. has to create the jobs and additional revenue which will help the long-term deficit issue.

>> good morning. the american consumer naturally is quite concerned when they go to the pomp for gas. what they are concerned about is they see the price of the oil going up. the price of their pumping goes up. when the price starts coming down, they do not see it lower. they noticed that back in 20008 that the price shot up to $147 a barrel. while they are pumping gas, it raises to $4 a gallon.

now they see the price at around $100 a barrel. you can still pay it at the pump. i want to ask thatuestion on behalf of the american people. >> it is a question of a supply chain. it takes the average time for crude oil produced to reach american refineries between 30 days and 45 days. this is yardy femt and prayed for. -- this has already been bought and paid for. the consumer pulls up to the pomp and buy it.

when the price changes, it has to make its way through the entire supply chain. when the prices are going up, the retailer who owns the station they are not owned by us. they are owned by distributors. they have to think about what will happen tohe ministry. they begin to price up in advance of how the barrels are getting to them to ensure they have sufficient cash flow. that is why going up is going to chase is a little faster. they had to recover the cost of what they have already spent. the consumer is not going to see it. that may take between two and

three weeks depending on how big the movement is. >> i anticipated that that would be the answer. i appreciate that. the person who is pumping the gas is saying tod i am paying $4 for a gallon of gas and oil is selling at $100 a barrel. three years ago i was paying $4 for a gallon of gas and oil was selling at $147 a barrel. why? >> the price and not last very long. you remembered what happened shortly after. this is the nature. we talked about this earlier. this has an extreme amount of volatility. we could have an entire hearing on that subject.

>> i would say there is a part to the speculation that as did that. people do not use the oil. let me register a difference of opinion would be key. you are all in your financial report in the fourth quarter of last year. you announced that the gulf oil spill was good to be a problem. you reported a tax credits of almost $12 billion. for activities that cause such harm, does it not seem wrong that you would take as a tax credits on the payments that you are paying out to make people's lives right?

>> let me first, that we have pledged to meet every commitment under the law. there is the economic impacts. the 41 billion is a financial charge. we did not take the credit. in terms of writing in off, they take it off as you occur. >> you consider these as standard business expenses. >> the ones that are under the tax code, yes. we will not write about things that are not under the standard businesses. it is interesting that when the boeing co. had these payments they did not take it as a tax credit.

it is also the other company. goldman sachs was the same thing. because of the sensitivity, surely the gulf oil spill was a result of the long doing. e what to claim that as a tax credit. i respectfully disagree with your position. i would urge the ranking member to consider as he may be entitled but it does that make it right. i would ask respectively that we consider changing it. >> there was a request.

we finish the question. >> thank you so much. about a month ago, right in the middle he is to be the vice chairman. we are asking a group of really smart people. i think heaid the guerrilla and the groom was health care costs. they get worse results. he said that is the a in a pound gorilla in the room. >> we fd out what works. we do more. that is what he said.

to more of that. our republican friends were over there. we are having a conversation about deficit-reduction. this is the route the government. it is better results for the same amounts of money. it is to a culture of thrift. when it comes to tax

expenditures, we need to do the same thing. there is a strong belief in that country. some of e tax expenditures relate to your industry. it did not always had the best results. later this year we will be voting on an exit strategy of about four trillion dollars. we would you that largely on the spending side. entitlements of be on the table. taxes benchers of be on the table. this should be the end of the conversation. we should continue to configure a how to get better.

your industry needs to be involved in that as well. i do notretend to understand it especially well. i would not consider myself an l company. most of you do that. the efforts you are undertaking is moving us away from the process. there are sources of energy. will does it. enables us to come up with new things. they find themselves around the world. do you want to go first? tell us what you are doi. we develop renewable. what can we do to help you there? >> agree wholeheartedly with

your comments on the deficit. ultimately, we are an advocate for tax reform. all of these things should be on the table. as to what we are doing in developing alternative skills, this is what we know the best. we are not into windmills. we are not into solar. as we have evaluated all the technologies, the one that we believe has the most promise is to capture by appeals from houses. we undertook a joint bid share. we had $6 million. they have considerable expertise. we think we will have to synthesize the type of ones that

are necessary to scale up. we have to take this to scale. it has to be delivered at cost that the consumer can afford. we believe there is a lot of promise. it is a lonroad ahead of this. >> thank you. we continue to ramp up r spending. we have a program that expresses its. fossil fue will continue to represent more than 80%. it is required around the world. one of the key things that is important is natural gas. technology developments, some thought it was for decades. we are really applying a lot of research and development. how come we do it more efficiently?

we think our country is well blessed with theseesources. >> thank you. we think ooil and gas as the main driver in our business. incremental to that is alternative energy. we invested $7 billion over the last several years. it is a growing business. it is difficult. it is growing. >> we do consider ourselves an energy company. we want to be the most innovative and competitive energy company in the world. that is the perspective we are in. in.