Regulators Consider Capping Oil Production For 1st Time In Nearly 50 Years Both demand and prices for crude oil have plummeted due to the economic shutdown. Now, U.S. oil regulators are debating whether to cap production — for the first time since the 1970s.
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Regulators Consider Capping Oil Production For 1st Time In Nearly 50 Years

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Regulators Consider Capping Oil Production For 1st Time In Nearly 50 Years

Regulators Consider Capping Oil Production For 1st Time In Nearly 50 Years

Regulators Consider Capping Oil Production For 1st Time In Nearly 50 Years

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  • <iframe src="https://www.npr.org/player/embed/848666568/848666569" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Both demand and prices for crude oil have plummeted due to the economic shutdown. Now, U.S. oil regulators are debating whether to cap production — for the first time since the 1970s.

ARI SHAPIRO, HOST:

The U.S. is the world's largest producer of crude oil, and that's caused a lot of pain during this shutdown. Demand and prices have plummeted. Now, to try to stabilize prices, Texas, Oklahoma and North Dakota are debating whether to cut back the amount of crude oil that companies can pump from the ground.

Mose Buchele of member station KUT reports from Austin, where regulators are expected to vote on a plan next week.

MOSE BUCHELE, BYLINE: A few weeks back, if you watched the livestream meeting of an obscure Texas agency called the Railroad Commission, you would have seen something most people here never thought possible - an oil man begging the government to regulate his industry.

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SCOTT SHEFFIELD: We recommend that Texas reduce 1 million barrels a day for the month of May and be prepared to reduce again.

BUCHELE: That's Scott Sheffield. He's CEO of Pioneer Natural Resources. He argued that reductions like this were necessary because, quite simply, his industry couldn't be trusted to do it on its own.

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SHEFFIELD: Our industry has created so much economic waste that nobody will buy our stocks or own our stocks.

BUCHELE: Despite its name, the Railroad Commission oversees fossil fuel extraction in Texas. It has a reputation for being very hands-off when it comes to regulation. But under a law dating back to the 1930s, it can limit the amount of crude companies pump, a lot like OPEC does to fix the price of oil. But Texas hasn't done that since 1973. Now, with demand cratering and oil storage space running out, people like Sheffield think those caps are the U.S. industry's best hope.

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SHEFFIELD: If the Texas rural commission does not regulate long term, we will disappear as an industry, like the coal industry.

BUCHELE: But companies and regulators are divided. Opponents say, eventually, companies will make needed cuts on their own. They don't want to open the door for government control of industry. Todd Staples is the head of the Texas Oil and Gas Association.

TODD STAPLES: It is government intervention itself that would cause haphazard curtailment of production and cause waste. Texans fundamentally believe government should not be in the business of picking winners and losers.

BUCHELE: So who stands to win and who to lose? Owen Andersen is an oil and gas law professor at UT Austin. He says large oil companies, so-called super-majors, are better positioned to weather this historic bust, maybe even come out on top. So they tend to oppose the intervention.

OWEN ANDERSON: They're probably looking at this downturn as a buying opportunity because, of course, they have some capital assets that they could devote to buying up companies and properties probably for bargain, basement prices.

BUCHELE: But smaller, so-called independent oil producers were struggling with debt even before prices crashed. They don't have the same access to pipelines and refineries. They say if the state doesn't act, this is an oil bust they might not survive.

ANDERSON: And they've got good reason to be concerned, probably more reason now than they have in the past.

BUCHELE: In between those factions sits the Railroad Commission, where the plan to cut back oil production is in doubt. Of the three members, one has already come out in favor, saying it might save jobs. Another has come out against, citing free market principles. One thing they all agree on is that Texas could not go it alone. If they do decide to limit production, they'd want other states to make similar commitments and say they'd need Russia and OPEC countries to promise deeper cuts than they've already pledged.

For NPR News, I'm Mose Buchele in Austin.

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