It's time for a reality check: Politics and business don't mix, and that is especially true if you are in the energy business today.There are claims that energy industry executives "lied" when they testified before Congress last week, and that has Democrats smelling blood. The claim is that at least two companies, Exxon Mobil ( XOM) and ConocoPhillips ( COP), had officials participate in the now-infamous 2001 Cheney Energy Task Force. Both companies' executives testified before Congress last week that they were not involved in the proceedings. And, moreover, Sen. Barbara Boxer (D., Calif.), claims that Shell Oil ( RDS.A) President John Hofmeister was not truthful about the company's decision to shutter its refinery in Bakersfield, Calif. There is now chatter that the executives should be dragged back to Washington, shackled and forced to sit through another six hours of questions from senators who have only one item on their agenda: find a way to blame these executives for every worldly ill, all of which, of course, are the result of higher oil and gasoline prices.
While it is a good question to wonder what this has to do with skyrocketing energy prices, the fact the oil companies can be linked to the energy task force in some fashion and did not admit it in recent testimony, is enough to create new drama in Washington and headlines that cause indigestion for Big Oil investors. That all makes it likely that a group of oil executives will reappear before Congress and that they will be questioned under oath and, potentially, under subpoena. It is just as likely that the hearing will be contentious, as members of Congress endeavor to look strong against corporate America, if for no other reason than to get good sound bites for campaign advertising. In that scenario, Big Oil can't win. And while it isn't likely to have a long-term impact on the companies, and there still isn't likely to be a meaningful change in taxes, the perception will be that Big Oil is losing the battle. That creates plenty of headline risk for Big Oil investors, at least in the short term.
If Congress were to open up new exploration lands and allow integrated companies to develop more refining capacity in key regions, the outlook for integrated might change. However, today's political posturing combined with challenges to growth make Big Oil a difficult place to pump profits in the energy space.
Why didn't they have gasoline? Because the major pipelines coming into Atlanta didn't have access to either product, or power to pressure the line to move the product through the line. Maybe Congress should investigate the pipeline and the power companies that lost power as a result of the storms. Better yet, maybe Congress should call in the weather forecasters who predicted the storms, or the big man who planned Katrina and Rita; they must be a part of the conspiracy as well. Storms happen, unrest in the Middle East happens, Venezuela strikes happen, Russia supply challenges happen, and China and India happen. And, believe it or not, markets react. Amazingly, too, they are pretty efficient. As supply and pipeline capacity has returned, prices have moderated. Now, many parts of the country are paying less than $2 for gasoline.