'Incredibly damaging': US oil lobby chief opposes proposal to have Texas conspire with OPEC

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'Incredibly damaging': US oil lobby chief opposes proposal to have Texas conspire with OPEC

by Josh Siegel

March 20, 2020 02:36 PM
 
The head of the largest U.S oil industry lobbying group is pushing back against proposals to resolve the crude oil price crash that would involve American officials negotiating a joint cut in production with OPEC and Russia ⁠— or even banning their imports.

“We have always supported the market to be an arbiter of the price of oil and gas, and during times of crisis it is not appropriate to abandon those principles,” Mike Sommers, the CEO of the American Petroleum Institute, told the Washington Examiner.

Sommers is particularly opposed to a proposal from a commissioner of the Texas Railroad Commission, which regulates oil production in the biggest producer state.

The commissioner, Ryan Sitton, proposed in a Bloomberg op-ed Friday that the railroad commission could use its authority to issue “pro-rationing” schedules — a power unused since 1973 — to force Texas producers to cut production to raise the price of oil. He said Texas could cut production 10% in exchange for Saudi Arabia and Russia each doing the same.

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https://www.washingtonexaminer.com/policy/energy/incredibly-damaging-us-oil-lobby-chief-opposes-proposal-to-have-texas-conspire-with-opec

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Texas used its proration power to regulate oil since the Railroad Commission took over the oversight of oil production in the state in 1919.

It is mainly directed at minimizing waste of oil by management of the reservoir in a manner which lessens the chances of excessive production on a per well and per reservoir basis.

There is also a component of economics for the producer to enhance the abilities to produce at rates that might be somewhat wasteful but are required to provide a sufficient return on investment.

Any decision to hold back production to support Texas producers is solely a state decision, and no others.  Having said that, I for one would frown on doing so in conjunction with OPEC or Russia.

I remind other states that Texas was forced to damage its economy and endure arbitrarily low prices of both crude and natural gas during the 70s when federal controls were implemented for the benefit of other states for those states to enjoy lower cost of energy.

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And the API does not speak for all the industry either.

WSJ: Oil executives request relief from Texas Railroad Commission
Oil executives have requested the Texas Railroad Commission limit production in order to give companies respite during the fallout facing the industry, according to a report from the Wall Street Journal. The regulatory commission is mulling over the request and staffers are looking at the options, the report said, citing people familiar with the matter. Specific oil executives were not named in the report.
https://finance.yahoo.com/m/7b5ff451-e6fa-3968-86bc-9bc4de6facf7/wsj-oil-executives-request.html

[Elderberry]

Texas Railroad Commissioner Fights Back Against Soviet Assault on US Oil Industry

WUWT by David Middleton 3/21/2020

OPEC secretary general invites Texas RRC’s Sitton to Vienna meeting

By JOE CARROLL, GRANT SMITH AND RACHEL ADAMS-HEARD on 3/20/2020

HOUSTON (Bloomberg) –One of the most powerful officials in the biggest U.S. oil state has been invited to OPEC’s inner sanctum in June in a rare rapprochement between two historically antagonistic crude powers.

Texas Railroad Commissioner Ryan Sitton said Friday he was invited by OPEC Secretary General Mohammad Barkindo to attend the group’s summer meeting in Vienna. But even as the surprise announcement reverberated across U.S. and international petroleum circles, Sitton’s proposal to curb Texas crude output for the first time since the 1970s ran into opposition from his own agency.

“While I am open to any and all ideas to protect the Texas Miracle, as a free-market conservative I have a number of reservations about this approach,” Wayne Christian, chairman of the Texas commission that oversees the oil industry, said in a statement. If Texas cuts supply, “there is no guarantee other nations, or even states will follow suit.”

More at link.