UTPB Dean of Business offers perspective on potential oil proration

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MIDLAND, Texas (Big 2/ Fox 24) – For the first time since the 1970’s, Texas is debating to place an artificial cap on oil production. The meeting lasted 10 hours with perspective from over 50 experts involved in the industry. The meeting adjourned with no answer, announcing they will reconvene in a week.

Some fear hundreds of thousand of jobs could potentially not return. CEO Scott Sheffield of Pioneer Natural Resources was one who spoke during the virtual meeting:

“My personal opinion is that this is going to go longer than anybody expected,” Sheffield said. “If the Texas Railroad Commission does not regulate long term, we will disappear as an industry, like the coal industry.”

Scott Sheffield, CEO Pioneer Natural Resources

Others think that this is unnecessary, and that Texas should adhere to the principles of supply and demand. Basically – just let the market run its course. Texas State Representative Lyle Larson says the discussion is, “is both arrogant and condescending to every Texan… the most un-American thing we have heard in Texas in the last 50 years.”

Stephen Beach, the Dead of the UTPB School of Business thinks that having these conversations are important.

“Prorationing is really a state decision, it’s not something from the federal government. So each state would look at it independently. Texas and Oklahoma have indicated they are considering that approach. It’s healthy to be having this discussion.”

Stephen Beach, Dean of UTPB School of Business

A lot of what Texas will do depends on what other producing states might do.

I haven’t heard what the other states might be thinking. This is something here the markets are going to do their part. it is going to be difficult for independent states to succeed whole heartedly with this if we don’t have similar constraints going on in some of the other states too.

Stephen Beach, Dean of UTPB School of Business

So why place a cap on oil if the Texas Railroad Commission has not had to prorate oil production since 1973? The oil industry has had plenty ups and downs since. However, Beach claims this has pushed many people who lean to free market thinking into calling for capping production to quickly solve this growing issue in the short term.

“This is just an unique event. We should be bailing some people out. We have people all across the planet that need some support in having well functioning governments in place to do so, and that is one of the reasons they are really contemplating prorationing, but at the end of the day, it needs to be the market that is determining this.”

Stephen Beach, Dean of UTPB School of Business

The Railroad Commission currently does not have a consensus on an answer – they are meeting again Tuesday the 21st.

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