Senate Committee on Energy and Natural Resources grilled oil company executives yesterday about their role in recent oil price increases. For some reason I did not find any coverage in the mainstream media of this very interesting exchange between the senators and oil tycoon Jed Clampett.
Mr. Clampett owns a ranch near Bakersfield, California on which he holds the royalty rights to a small stripper well that’s producing 2,000 barrels of oil each year. His operating costs last year came to $30,000. Last year he sold his oil at an average price of $40, with profits of $50,000 (40 x 2,000 – 30,000 = 50,000). This year he’s selling the oil for $60 a barrel, earning profits of $90,000, almost double what he made just the year before.
Senator Pete Domenici (R-NM) asked, “My constituents think someone rigged the price and someone – them – is getting ripped off. Mr. Clampett, are you rigging the price of oil?” The rancher stared at his hands and muttered that the only thing he knew how to rig was a harness.
Senator Barbara Boxer (D-CA) produced a chart showing that Mr. Clampett earned $40,000 in extra profits this year. “Working people struggle with high gas prices,” she scolded Mr. Clampett. “And your sacrifice appears to be nothing.” Mr. Clampett shifted in his seat and responded that if he wasn’t in the business of selling a little oil to a thirsty market, the problems faced by working people would only be worse.
In other testimony, Lee Raymond, CEO of Exxon-Mobil, claimed that, like Mr. Clampett, his company doesn’t control the price of oil either, since Exxon-Mobil only accounts for 3% of global oil production.
After the hearings, Senate Majority Leader Bill Frist (R-TN) said that the testimony by Clampett and Raymond did not “adequately answer the question of whether the sky-high gas prices we saw earlier this fall were entirely justified,” or whether their “profit margins are appropriate.”