(June 5, 2020)
Texas energy regulators have not stepped into the oil market for five decades, and that track record appears unlikely to change soon. Discussions began in April over the possibility of restricting oil production to help cope with the unprecedented collapse of prices, but the Texas Railroad Commission ultimately rejected the idea on May 5.
The debate emerged due to the mounting crisis facing the energy sector and the economy at large. Oil producers in the Permian Basin and elsewhere throughout the Lone Star State were hit hard by a dispute between Russia and Saudi Arabia that led to an oversupply of oil on the global market in March. More fundamentally, however, the coronavirus pandemic has sharply reduced economic activity, which in turn has seen demand for oil plummet.
The Commission ultimately decided against imposing a cap – also known as a proration – by a 2-1 margin. Railroad Commission chairman Wayne Christian was joined by Commissioner Christi Craddock in opposing the move, while Commissioner Ryan Sitton advocated for it.
Rejecting the decision, Sitton remarked, “Right now to not act is in itself a choice. We’re seeing a level of demand destruction and oil industry downturn that in the past happened in the course of years, happening in the course of days.”