The True Nemesis of the Texas Oil Industry

The greatest threat to Texas from COVID-19, economically speaking, is perhaps the effect on its previously booming oil industry. Indeed, before the pandemic, Texas had recently become the third biggest oil producer in the world, and has, multiple times in the last ten years, gone toe-to-toe with Saudi Arabia. The industry has continually silenced the critics regarding how low (per barrel) Texas could go and still make a profit. Currently, it appears that figure is around $30, significantly higher than the current market price.

In order to curb the free-fall in prices in April, and otherwise preserve the industry, the Texas Railroad Commission entertained the idea of reviving a decades old system of prorationing, with the support of some (but definitely not all) of the West Texas producers. However, this approach was abandoned as it was felt to be anti-capitalist and, perhaps rightly, that the government would never be as responsive to the market as the industry. In other words, The Commission determined that while we undoubtedly will lose a lot of producers, perhaps we’d come out on the other side leaner and more able to weather a significant future storm.

There are many reasons for the current circumstance, but the clear trigger is the large percentage of businesses that were summarily shut down by state governments across the United States. This translates to a massive decline in demand as far fewer drivers are on the road getting to work. The loss of commerce also lessened demand for shipping parts, equipment, and supplies for such businesses. Given that the states took their marching orders directly from Washington, its not hard at all to put the lions share of the blame for the current predicament on the overly hasty knee-jerk from our elected (and non-elected) leaders in Washington, D.C.

However, Rome was not built in a day, and the severity of the current situation can not be blamed solely on the repercussions of COVID-19. Indeed, the crisis we are facing was put in motion over many decades.

Regardless of recent events, the Texas oil industry would be struggling right now, just as all the other worldwide producers. One must wonder if the Federal Government had not been such a massive obstacle to the development of “The Texas Miracle,” where would Texas oil now stand? From the 1970s until fairly recently, Washington DC has held Texas oil under its thumb by:

Some would argue at this juncture that the United States should, at least for now, block or limit imports of foreign oil in lieu of domestic sources, in order to protect our industries. In such a time as now, its hard not to see the logic in this. Nevertheless, we’ve yet to see any real action, assistance, or even guidance from Washington other than agreeing to top off the National Strategic Oil Reserve. Currently the biggest issue for West Texas producers is the inability to store any more oil. The path forward for the industry is unclear, and the future appears bleak.

When we turn this corner, a pillar in the argument for an independent Texas will be the ability to steer our own economic course, and to more adeptly and appropriately react to threats to our many industries. Certainly, a free Texas would not have so quickly taken a knee at the alter of federal disaster funding, nor would Austin been so quick to summarily shut down businesses had it not been for  pressure from Washington.  Furthermore, I find it hard to believe that we would be refining Saudi or Russian crude at all on the Gulf Coast, were it not for the questionable alliances of the US. Let us then, throughout this crisis, work to continually build the case for an independent Texas Republic.