Primed at the pump

Oil firms are under pressure to explain their part in the perpetual pattern of gasoline price hikes.

Oil firms are under pressure to explain their part in the perpetual pattern of gasoline price hikes.

The storm of recent media reports over higher gas prices in the US might seem bad for energy companies. But Dave Samson, GM of public affairs for Chevron, argues that it has also been an opportunity.

"If we were at $10 a barrel, the [chance] to tell our story on Today or Good Morning America is not there," says Samson.

Such media appearances, including one by Chevron's CEO live on GMA on an oil platform in the Gulf of Mexico, have been part of a broad effort by energy companies to explain just why gas prices are what they are. It hasn't been easy, they say. The massive profits enjoyed by the companies lately - ExxonMobil, for example, last year posted the largest annual profit in corporate history - have contributed to what Samson calls a very "emotional environment."

But individually and through the American Petroleum Institute (API) trade group, energy companies have funded ads in a range of titles to explain the complexities of gas pricing, arguing that they're based on geopolitics and a development process that involves extensive exploration, production, distribution, and refinement. A gallon of gas, like a bottle of water, may seem to be a very simple thing to a casual observer, but creating that gallon of gas is hardly simple.

In addition to ads and media appearances, energy companies have also sought to give speeches to local community leaders, such as chambers of commerce and rotary clubs, notes Mark Boudreau, an ExxonMobil spokesman.

"We've had a number of conference calls and face-to-face meetings with the media," he says. "We have an active speakers coalition."

Whether large or small, all energy companies are basically grouped together in the public's mind, says Marathon Oil director of external communications Paul Weeditz, so working through the API to coordinate messages makes sense. Perhaps most important, the industry has sought to prevent legislative action that might impose "windfall profit" taxes which would hurt the companies' bottom line and, they argue, discourage investment.

So far these efforts have largely failed. For example, a $70 billion tax-cut bill recently signed into law by President Bush originally included what was essentially a windfall-profits tax that the Senate insisted on including, explains Tyson Slocum, research director of Public Citizen's Energy Group. But that was dropped, along with other schemes, such as a $100 rebate scheme.

Staying aggressive
Samson says that unlike the past, when previous price spikes smoothed out and the industry retreated from the public eye, this time it plans to stay aggressive in seeking to educate the public on the economics of gas pricing.

Darci Sinclair, senior media relations specialist for Shell, says her company launched on June 16 a 50-city tour, starting with Dallas, that would last a couple of years. It involves senior Shell leaders traveling to cities - many of them mid-sized markets such as Milwaukee, Detroit, and Charlotte - to meet with consumers, civic groups, business and environmental organizations, educational institutions, and others not only to discuss how supply and demand in the energy market works, but also to "listen to their concerns."

Boudreau says neither his company in particular, nor the industry in general, was exactly caught off guard by the public reaction to higher gas prices. After all, some public outcry over rising prices and calls for legislative action tend to occur every year around the start of the summer driving season, when energy companies switch over from winter to summer fuels, and demand for gas rises as families go on driving vacations. But the industry clearly had not been doing enough to talk to the public, he says.

"Obviously, from the comments being made and the questions we get, we need to do a better job of communicating what the industry is all about," Boudreau says.

Public has its say
With the rise in prices this year, various Web-based public information efforts decrying energy company policies and practices, including, have gained prominence. To what end? As many industry observers note, few people are likely to actually boycott gas. But while the threat of legislation appears to have died away, at least until another gas shock comes along, various public advocacy groups, like Public Citizen and the Consumer Federation of America, that are calling for new taxes to be levied against energy companies say the debate is not over.

Public Citizen's Slocum says Congress may be quelled for now, but not the public in general, and rising energy prices will be a large factor when people vote this November. Whether that turns out to be the case remains to be seen, but energy will surely continue to be part of the public debate, with the industry's arguments continually countered by nonprofit groups that seek to influence Congress through e-mail blasts and other grassroots campaign tactics reaching activists throughout the US.

API CEO and president Red Cavaney says his group will continue with its public information campaign for some time, moving from the initial general message about how complex factors out of individuals companies' hands shape gas prices to more specific arguments, such as how "boutique" fuels, which are mixtures of gasoline that vary from state and state, contribute to rising prices.

"We'll point this out in coming months. If we didn't get the basic message out first, people would never get off those issues about the industry," Cavaney says. "After we've done that, we have the luxury of being more specific."

Energy demand is only likely to grow while supply tightens, putting continual pressure on prices. With the industry expected to feel equal pressure from the public about its practices and profits, its information campaigns will not likely be over any time soon.

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