Big Oil is going on a public relations counteroffensive.
Amid continuing charges of profiteering with the immediate run-up of gas prices following Iraq's invasion of Kuwait nearly two weeks ago, U.S. oil companies are responding with highly publicized price freezes at the pump, full-page newspaper advertisements, lengthy position papers and, even, a radio talk show appearance.
At 9 a.m. today, Chevron Chairman and Chief Executive Kenneth T. Derr will be the featured guest on KGO-AM's morning call-in show in San Francisco. For an hour, he will field the public's questions about crude oil and gasoline prices and how the recent events in the Middle East have affected them.
"I believe there's a widespread misunderstanding about how we establish wholesale prices, and it's my hope that I can help clarify some of these issues," Derr said Sunday in a prepared statement explaining his decision to make a rare appearance on live radio. "Recent charges of oil company 'price gouging' and 'profiteering' concern me a great deal."
Derr is not alone. Last Friday, Atlantic Richfield Co. released a lengthy position paper explaining its views of the supply problem and its impact at the pump. The Los Angeles-based supplier, along with Amoco Corp., Unocal Corp. and Getty Petroleum Corp., also promised to freeze prices to dealers for a week. Arco said it would raise the prices it charges independent dealers, who are free to set their own pump rates, "only if it is necessary to avoid panic buying" that could threaten its ability to maintain adequate supplies.
While the oil companies are bemoaning lack of public understanding of their business pressures, cynics contend that their recent moves also reflect fear of possible government price controls on gasoline. There have been recent rumblings in Congress about the latest run-up in gas prices.
But Big Oil's P.R. machine maintains that the companies are more interested in polishing a public image that has been tarnished by persistent allegations from consumer advocates that oil refiners and distributors have been using the Middle East crisis as a pretext to increase prices of supplies purchased weeks before the military hostilities.
"The oil industry isn't perfect by any stretch of the imagination, but they are not the sole villain in the current problem," said Peter B. Necarsulmer, president of PBN Co., a San Francisco crisis-management public relations consulting firm. "However, they are responsible for the lack of public understanding of the current issues."
Even one of the oil companies' staunchest supporters, Herb Schmertz, Mobil Oil's former vice president of public affairs, criticized the industry for failing to speak out in a way that the public could understand. "The oil companies are doing themselves and the public a disservice by not speaking out on the issues," Schmertz said in an interview last week. "The public is entitled to this information."
Initial responses about the price increases from oil companies were complex and sometimes confusing, as they attempted to explain the complicated inner workings of commodities markets, refinery capacity and oil reserves. When it appeared that the message wasn't getting across, tactics changed.
"Where's the rip-off?" Mobil demanded in an ad that ran last week in some East Coast newspapers. The ad featured a graph tracking prices on the "spot," or open, market for the domestic benchmark crude oil and regular unleaded gasoline from early July through the Iraqi invasion of Kuwait early this month.
Texaco, Exxon, Arco and Amoco are also investigating the possibility of beefing up advertising on their side of the gasoline-crisis argument. Testimony at state legislative and regulatory-agency hearings also is scheduled in coming weeks.
The question of how effective Big Oil's P.R. offensive will be with a skeptical public is likely to remain unanswered for a while.
In some areas, retail gasoline prices jumped an average of 15% in the 10 days following Iraq's invasion of Kuwait, prompting President Bush last week to call for restraint from the oil industry and consumers alike. Congress has responded in its own way with talk of government price controls on gasoline similar to those imposed after the Arab oil embargo of 1973.
Senate Minority Leader Bob Dole (R-Kan.) also warned the chief executives of the top 11 U.S. oil companies in a telegram Wednesday that "it will be very difficult to stop legislation controlling the prices of petroleum products . . . should no action be taken by the oil industry."