Oil Industry's Woes Get Senate Panel Hearing Thursday
By Tom Doggett
WASHINGTON (Reuters) - The problems plaguing the U.S. petroleum industry, including
historically low oil prices and mounting job losses, will get some scrutiny at a special hearing
Thursday morning before the Senate Energy and Natural Resources Committee.
A long list of witnesses from the government and private sector will give their assessment of the
current state of the oil industry during what is expected to be a three-hour hearing. The hearing is set
to begin at 9 a.m. EST.
Those testifying include Jay Hakes, administrator of the Energy Information Administration, which is
the statistical arm of the U.S. Department of Energy; Exxon Corp. (NYSE:XON - news)'s
Chairman and Chief Executive Officer Lee Raymond and North Dakota Gov. Edward Schafer, who
will speak on behalf of the Interstate Oil and Gas Compact Commission.
The price of oil is at the lowest level in a generation, making a gallon of gasoline cheaper than a trip
to McDonald's. Worldwide crude oil prices fell below $13 a barrel in 1998 and are still hovering
there, down from an average of $17 to $21 a barrel in the previous 10 years.
While consumers are benefiting from lower energy prices, the Senate committee will look at how oil
producers and related industry workers are suffering as a result. Big U.S. oil companies cited
plunging oil prices as the reason why their 1998 fourth-quarter earnings were whacked by special
charges, leading to net losses, in some cases.
The U.S. oil industry, including support services, lost 21,000 jobs in the 12 months to October
1998, a decline of about 6 percent of the total oil workforce, according to the latest U.S.
Department of Labor data.
In addition, there are thousands of employees whose jobs are still to be cut, in layoffs already
announced by major oil companies.
Many of those jobs will be lost as the result of oil companies merging. The oil industry's ongoing
consolidation and the pending merger of Exxon and Mobil Corp. (NYSE:MOB - news) are
expected to be discussed at the hearing.
While big oil companies are surviving the current crisis, many independent oil producers, which
account for a large part of the U.S. oil supply, are not faring as well.
The committee will review the problems independent oil producers are having and consider possible
relief that Congress and the Clinton administration can provide, such as tax credits and buying oil for
the nation's Strategic Petroleum Reserve. The reserve was created in 1973 during the Arab oil
embargo to provide the United States with an emergency oil supply.
With crude prices so low, it is cheaper to buy foreign oil than drill for it domestically, which has
caused U.S. oil production to reach the lowest level since 1954.
Growing U.S. dependence on oil imports is a major concern of Senate Energy Committee Chairman
Frank Murkowski, an Alaska Republican, who will raise the subject at the hearing.
A lot of that oil is coming from Iraq, which has become a major supplier of oil to the U.S. market. In
the first 11 months of 1998, Iraq shipped 106.93 million barrels of oil (320,000 barrels a day) to the
United States, making Iraq the seventh-biggest U.S. crude supplier during the period, according to
the Department of Energy.
Murkowski is very critical of U.S. oil purchases from Iraq, and has criticized the Clinton
administration for seeking to lift the ceiling on the amount of oil Iraq is allowed to sell under a special
United Nations oil-for-food program. That program, which began in December 1996, is an
exemption to the oil embargo imposed on Iraq after it invaded Kuwait in August 1990, which led to
the Gulf War.
Saudi Arabia is the largest oil supplier to the United States, followed by Venezuela, Mexico,
Canada, Nigeria and Angola.
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