By Justin Blum
Washington Post Staff Writer
Friday, October 28, 2005; D01

High prices for crude oil, gasoline and natural gas helped Exxon Mobil Corp. to its highest-ever quarterly profit, $9.92 billion, up 75 percent from the third quarter last year, the company said yesterday.

Profit in the third quarter at the world's largest publicly traded oil company set an industry record, and its sales of $100.72 billion were the highest in a quarter by U.S. company, according to Standard & Poor's.

Other oil companies have reported soaring third-quarter profits this week. Royal Dutch Shell PLC, based in the Hague, said yesterday that its third-quarter profit was not far behind Exxon Mobil's: $9.03 billion, up 68 percent. London-based BP PLC reported profit of $6.53 billion, up 34 percent.

The industry benefited from tight supply and heavy demand that sent crude oil prices higher on world markets.

Hurricanes in the Gulf of Mexico helped push futures prices for crude oil close to $70 a barrel and sent retail gasoline prices above $3 a gallon during the quarter. Natural gas prices rose to record highs.

Members of Congress are under pressure from constituents to do something to bring down gasoline prices. A gallon of regular averaged about $2.57 nationally yesterday, according to an AAA-sponsored survey.

A group of Democratic senators yesterday renewed calls for a windfall-profit tax on oil companies, which would be charged against some profits that are not devoted to exploration and development of new production. The proposal has languished for weeks. The oil industry and Republican leaders have opposed it, saying it would stifle corporate spending on new production.

"These gains come from pain at the pumps that the American people are feeling," said Sen. Byron L. Dorgan (D-N.D.), who introduced the measure. "These profits are far beyond that which these corporations would normally earn. . . . At some point the majority party will pay a price for this if they don't respond."

Republican leaders, who have supported legislation to grant tax breaks to oil companies to encourage more production, yesterday called for an examination of high energy prices, including those for gasoline. Senate Majority Leader Bill Frist (R-Tenn.) yesterday said in a written statement that he has requested hearings and that executives from major oil companies are expected to testify. Frist also asked for a congressional committee to investigate whether there has been price gouging.

"Whether it is fluctuating gas prices, disparities in gas prices at stations right next to each other, the sharp rise in natural gas costs, or the anticipated crunch for home heating oil, Americans are wondering what has happened to push costs through the roof," Frist said.

The oil industry downplayed the profits.

Rayola Dougher, manager of energy market issues for the American Petroleum Institute, a District-based industry group, said oil companies' earnings per dollar of sales are below, or in line with, those of other industries. She said Irving, Tex.-based Exxon Mobil made about 9.8 cents on every dollar of sales. In comparison, she said, McDonald's Corp. earned 13.8 cents and Coca-Cola Co. earned 21.2 cents on every dollar of sales.

Oil companies charge consumers based on commodity prices set on international markets, Dougher said. She said higher prices are the reason the United States did not have major shortages of oil products after the hurricanes; the prices dampened demand and attracted more gasoline imports from overseas.

Some members of Congress have complained that oil companies have not expanded domestic refinery capacity at the rate that demand for gasoline and other oil products has increased, making the country more vulnerable to refinery disruptions. Lawmakers also have questioned whether enough money is being spent to find and produce oil around the world. When production is disrupted, the world has little ability to pump more oil than already is flowing, one of the factors that keep prices high.

Exxon Mobil described its earnings in a conference call yesterday in which analysts said the company went out of its way to downplay its profits and emphasize increased spending on new production. Exxon Mobil noted that the hurricanes decreased its production in the Gulf of Mexico and reduced its refining capacity.

The company earned $7.3 billion from production and its natural-gas and power-marketing business. Refining, distribution and marketing earned $2.1 billion. Exxon Mobil's chemical business brought in $472 million.

Exxon Mobil has been spending some of its money on share buybacks and on increasing dividends and reducing debt. It reported that it had about $34 billion in cash on hand -- up nearly $4 billion from the second quarter.

The company's profit was slightly below what analysts expected. Some said that was because of lower earnings in the company's chemical operations, which had to pay more for petroleum products used to make the chemicals.

As a result of the profit report, environmentalists, who have an ongoing campaign against Exxon Mobil, said they sent a letter to company chief executive Lee R. Raymond asking him to forgo any benefits from tax breaks allowed under current law. "It does not appear that Exxon Mobil needs support from the federal government," the letter said.

Exxon Mobil spokesman Russ Roberts said the company does not seek tax breaks. But he said the environmentalists' request, along with the windfall profits tax proposal, were bad ideas and could limit spending on new production. "If they want us to invest in things, you can't . . . give us disincentives to invest," Roberts said.