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NOVEMBER 14, 2005
Edited by Richard S. Dunham Is It Still The Grand Oil Party? When it comes to having a nose for changing political winds in Washington, your prototypical oil industry CEO bears an uncanny resemblance to Alfred E. Neuman. Only a week after two normally reliable and pliant Republicans -- House Speaker J. Dennis Hastert (Ill.) and Senate Majority Leader Bill Frist (Tenn.) -- leveled rhetorical broadsides at Big Oil for record third-quarter profits, sky-high prices, and failure to commit to new refineries, many energy executives are brushing aside the barbs as mere cover-your-tail rhetoric from fretful friends. After all, Republicans received more than $20 million from energy interests in the last election, and the two oilmen who run the White House have never gotten tough with their political benefactors. So you can understand why Big Oil's response to Republican potshots is: What, me worry? "This is more an image thing than a substance thing," says one industry lobbyist. Indeed, an internal ExxonMobil document obtained by BusinessWeek argues that the company's profits are reasonable -- far more so than the financial industry; that prices are driven by supply and demand; and that Congress should "pause" before doing anything dramatic. But with voters seething over energy prices and GOP leaders under an ethical cloud, Republicans up against a political wall might, for the first time, take action against an industry that funnels 80% of its political contributions their way. "House Republicans have acted" by giving the industry tax breaks, Hastert says. "Now the oil companies need to do their part." Energy leaders will run into a PR buzz saw on Nov. 8 when Senate Republicans hold hearings on energy prices. Scheduled to face pointed questions: Exxon Mobil (XOM ) CEO Lee Raymond, ConocoPhillips (COP ) CEO Jim Mulva, and John Hofmeister, president of Royal Dutch/Shell Group's (RD ) U.S. operation. "They don't know what's going to hit them," says one oil lobbyist. "They're not going to have one friend up there.... You can't go reporting record profits and explain it away as supply and demand." The same lobbyist says he's reminding clients of the fate of Big Tobacco, a once-powerful force on the Hill. "The message to these guys is, 'The American public thinks you are evil."' Windfall Profits Tax Hastert, whose Illinois constituents are shivering at the prospect of soaring winter heating costs, is trying to pressure Big Oil to build new refineries, and threatening to probe price-gouging charges. And Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) wants energy companies to exhibit "good corporate citizenship" by donating cash to help the poor cope with heating bills. Is Big Oil about to be subjected to the kind of mau-mau-ing that is forcing Wal-Mart (WMT ) to make concessions to critics? Perhaps. Some Republicans, for example, are talking openly about a one-time increase in the royalty fees companies pay to extract oil from federal lands. And Senators Judd Gregg (R-N.H.) and Susan Collins (R-Me.) are calling for a windfall profits tax, a pet idea of Hill Dems. Bottom line: The politics of oil has changed fundamentally. An Oct. 12-24 Pew Research Center poll found that oil companies, never high atop the corporate hit parade, have reached an all-time ratings low with the public: Only 20% have a favorable impression. With support for the Republican Congress dipping below 30%, the party leadership seems serious about opening up some distance from its longtime oil-patch allies. By Eamon Javers 
CAPITAL INSIDER Godspeed, Mr. Oxley. Now Let's Party House Financial Services Committee Chairman Michael Oxley's Nov. 1 retirement announcement gives a boost to business-led efforts to rein in the corporate-governance legislation that bears his name. Companies complain about compliance costs and say the Sarbanes-Oxley law gives government enforcers too much leverage in probes of corporate wrongdoing. GOP leaders were never keen on the get-tough 2002 law, designed to defuse public anger at corporate scandals. But they felt a political imperative to do something to show they cared about crime in the suites. Now, with co-authors Oxley (R-Ohio) and Senator Paul Sarbanes (D-Md.) retiring in 2006, business lobbyists should have a good chance to water down "SOX" in the 2007 session of Congress. "Time to repeal Sarbanes-Oxley!" exults one GOP staffer. Meanwhile, Oxley's news has set off a spirited succession struggle for control of a committee closely watched by Wall Street. The contenders most likely to get the gavel represent different approaches to business. Representative Richard Baker (R-La.), chair of the capital markets subcommittee and a close Oxley ally, is an occasional thorn in Wall Street's side. He's the driving force behind reforming Fannie Mae (FNM ) and Freddie Mac (FRE ). Many corporate reps are lining up behind financial institutions subcommittee chair Spencer Bachus (R-Ala.), who has won kudos from business for his work on regulatory relief and deposit insurance reform. Bachus also has strong support from the GOP leadership. By Eamon Javers and Amy Borrus 
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