Video: Oil execs defend market forces

updated 6/18/2006 8:06:26 PM ET 2006-06-19T00:06:26

Americans paying $3 per gallon at the pump have it relatively cheap when compared with prices globally, say oil and gas company executives who defend their record profits as essential to maintaining supplies.

In parts of Europe and elsewhere in the West, gasoline prices are more like $5 per gallon to $7 per gallon, said the chairman of ConocoPhillips Co., James J. Mulva.

"This is a global business, and it's not only that we need to add to supply, but we need to reduce demand," Mulva said. "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."

Mulva and two other executives who appeared on NBC's "Meet the Press" said they are optimistic about keeping a lid on domestic prices, unless their fears come true about the potential for damage to U.S. energy production from the hurricane season that began June 1.

"I do understand why consumers are concerned. The thing that concerns all of us, I think, is that we're heading into hurricane season again," said the chairman of Chevron Corp., David J. O'Reilly.

Scientists say this year's season could produce 16 named storms, six of them major hurricanes. Last year's was the most destructive on record and the busiest in 154 years of storm tracking, with a record 28 named storms and 15 hurricanes.

Thousands of oil company employees living in temporary housing along the Gulf Coast are "much more subject to having to evacuate if hurricanes were to return," O'Reilly said. "But absent the hurricanes, I'm optimistic" that prices will not spike this summer.

Though many consumers blame high pump prices on oil companies greedy for profits, the oil company chiefs blame global competition for supplies.

"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," said the president of Shell Oil Co., John Hofmeister. He emphasized that the companies are seeking greater access to federal lands and offshore waters for exploration.

O'Reilly said "profits are in the midrange" and not as high as they could be, but that if prices were to decrease, the demand for oil and gas would increase and supplies could become short.

"The issue here is not the price issue. The solution here is how to increase supply," he said.

Hofmeister said his company has held "discussions with the White House quite frequently" on issues such as gaining greater access to more domestic supplies. The Bush administration has granted the companies ever-greater access to drilling areas on federal lands and waters.

"On a global basis, we're competing for resources," Hofmeister said. "If we're going to be more independent, we're going to have to address the tough, tough question of should we allow more oil and gas development in this country."

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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