If you haven’t heard much oil news lately, or if it’s been drowned out by the coronavirus, there’s a lot going on with oil in Texas, right now. Today we could see it boil to a head in a rare hearing in Texas.
The United States of America has become a net importer of oil. This means we import more oil than we export. Then the coronavirus hit. Then Saudi Arabia and Russia got into an oil price war. Yesterday, Donald Trump reached a deal with OPEC for the largest reduction in oil production the world has ever seen.
The deal that Trump cut is intended to cut oil production in the US by 20%. However, Trump can’t force any oil companies to cut their production. U.S. antitrust law prohibits oil companies from coordinating their production, and there is no way for the government to dictate production levels to private oil companies. This is Capitalism 101.
Trump’s OPEC deal probably won’t save the oil industry. However, it will appease his base who has been chanting “Drill, Baby, Drill,” ever since Sarah Palin hit the national stage.
Between the airline industry being mostly grounded and the increasing number of people working from home, oil saw a sudden drop in demand. In fact, it’s the sharpest drop in nearly 30 years.
In Texas, the Texas Railroad Commission is the governing body that sets oil output. They will be hearing arguments on both sides as to why or why not cut oil output in Texas. This hearing will be live-streamed.
Not surprising anyone, Exxon has already raised its concerns and opposes production cuts in Texas.
Here is the agenda for today’s hearing:
It’s important to not that Texas has not cut oil production since the 1970s. This is a big deal as far as Texas oil goes. The two oil companies, Pioneer Natural Resources and Parsley Energy are asking Texas to cut oil resources, as the demand is currently plummeting. On the other hand, a couple of operators have suggested pro-rationing oil as a solution. However, pro-ration is not a remedy TXOGA members are seeking. They believe it would disadvantage Texas, its producers, mineral owners and taxing entities.
While I don’t normally get excited about Texas Railroad Commission hearings, this one should be really good.