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API Urges the 'Texas Railroad Commission' Not to Intervene in Oil Markets--Including with Its 'Proration' Proposal


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Statement from Dean Foreman--API's chief economist--in:
MP3 format
Ogg Vorbis format
QuickTime (MPEG-4/AAC) format
Windows Media Audio 9.2 format
(87 seconds)


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(FOREMAN):
"
IN LIGHT OF OUR LATEST MARKET-DATA, WE REMAIN CONFIDENT THAT OIL-DEMAND SHOULD BE RESILIENT--ONCE THE EFFECTS OF 'COVID-19' DIMINISH.  AND, WHAT WE SEE NOW--IN 'A-P-I'- AND 'U-S ENERGY INFORMATION ADMINISTRATION'-DATA--IS AN IMBALANCE BETWEEN OIL-DEMAND AND -SUPPLY.  EVEN THOUGH THIS IS LARGELY A DEMAND-DRIVEN PROBLEM, MOST OF THE POLICY-SOLUTIONS THAT ARE BEING DISCUSSED--INCLUDING BY THE 'TEXAS RAILROAD COMMISSION'--TARGET SUPPLY, INSTEAD.  TO BEST POSITION THE U-S FOR A STRONG TRANSITION BACK, WE STRONGLY RECOMMEND [THAT] THE COMMISSION NOT INTERVENE IN THE MARKET AND LIMIT OIL-PRODUCTION IN THE STATE:  THE COMMISSION'S OWN DATA ON ALL PRODUCING WELLS IN THE STATE INDICATE THAT A GOVERNMENT-MANDATE, OR 'OPEC'-STYLE PRODUCTION-QUOTA, IS UNLIKELY TO IMPROVE MARKET-CONDITIONS.  INDEED, 'PRORATION' THAT SPREADS THE PROVERBIAL PAIN DIFFERENTLY THAN A COMPETITIVE-MARKET OUTCOME WOULD MAKE TEXAS LESS GLOBALLY COMPETITIVE.  AND, SINCE 'PRORATION' WOULDN'T APPLY TO THE SMALLEST FIELDS, THE EFFECTS WOULD CURTAIL THE LARGEST AND MOST-EFFICIENT WELLS, BASINS, AND PRODUCERS.  THIS WOULD DISPROPORTIONATELY HARM PRODUCERS IN THE 'MIDLAND'- AND 'EAGLE FORD'-BASINS--AND, POTENTIALLY, JEOPARDIZE THE STATE'S LONG-TERM OIL-WELL PRODUCTIVITY.  WHILE THE U-S WILL HAVE A ROLE IN OIL-MARKET REBALANCING, IT SHOULD INVOLVE MARKET-FORCES THAT--BY THEIR VERY NATURE--CAN PROVIDE POSITIVE INCENTIVES, FOR EFFICIENT OUTCOMES.  PROPOSALS TO MIMIC 'OPEC'; TO 'PRORATE' IN A DISCRIMINATORY WAY, ACROSS PRODUCERS; OR TO IMPLEMENT GOVERNMENT PRICE-CONTROLS WOULD, INSTEAD, BE A MAJOR SETBACK.  AMERICA NEEDS TEXAS TO BE PREPARED TO RAMP UP, QUICKLY--AND 'PRORATIONING' PRODUCTION NOW WOULD SELL TEXAS, AND THE REST OF THE NATION, SHORT."



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