Environment & Energy
Related: About this forumTX Oil & Gas Producers ASKING State To Limit Production: TRRC Considering Potential Limits
As oil prices cratered to an 18-year low last week, news leaked that oil and gas producers were asking Texas regulators to mandate a statewide cut in production a drastic measure that hasnt been attempted since the 1970s.
On Friday, the Wall Street Journal first reported that the Texas Railroad Commission (which, despite its peculiar name, regulates the states oil and gas industry) was contemplating instituting production cuts. Other news outlets later confirmed that the agency is studying whether capping the amount of oil produced in the state is practical, and whether it could even do so under existing laws and regulations.
If implemented, the measure could have serious economic ramifications for Texas and the rest of the U.S. But without the cooperation of other states, the federal government, and other oil-rich countries, energy experts say that slashing production in Texas alone is unlikely to provide serious relief to domestic oil and gas companies teetering on the edge of financial ruin.
The fact that such an extreme step is being considered at all is an indication of the dire predicament facing oil and gas producers. Banks have slashed oil price outlooks and now expect that prices will average between $25 and $35 per barrel for most of the year. Thats at least a third lower than projections for 2020 from just a few months ago projections that were already pretty low to begin with. Market analysts estimate that operators in the Permian Basin in West Texas need around $47 per barrel to break even. Proration, a regulatory term for production limits, could help companies shore up prices by making a dent in the industrys overabundant supply.
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EDIT
https://grist.org/energy/in-texas-a-half-baked-plan-to-save-the-oil-industry-from-a-coronavirus-fueled-crash/
Uben
(7,719 posts).did not see one pumpjack running! They shut down around here when the price gets low. (north Texas)
Three weeks ago we (myself and two cousins) drove through three counties on our way to see a relative. I first noticed an 80 with five pumpjacks and none were running. We kept counting and got up to 135 not running pumpjacks when we stopped counting. Did not see a single one that was running.
Have never seen anything like it.
btw - My Dad was a pumper early in his career so naturally one grows up noticing this sort of thing.
modrepub
(3,504 posts)The collapse in prices makes it very difficult for oil producers who have high debt burdens to pay back their bonds and/or loans. Like halving your salary but still having to pay the same expenses as you had before. While people will undoubtedly be pointing out lower pump prices they'll never consider how all the banks and bond folks are going to fare with they don't get their money back. Guess who gets bailed out in that situation (and who's going to pay for it).