When the price of oil drops, so does the cost of gasoline. But while people are enjoying paying lower prices at gasoline pumps, plunges in oil prices can cause economic damage in Texas.
And it can put American oil producers out of business when the price of foreign oil imports gets cheaper than the costs of extracting oil from the ground in the U.S.
Oil producers in the Panhandle recently announced the Panhandle Import Reduction Initiative. Their hope is to limit the amount of oil that can be imported from other countries.
We wish them success in getting sympathetic ears to hear their initiative and gathering like-minded people to help further it.
They are right that a limitation should be set on the amount of oil imports from the Organization of Petroleum Exporting Countries.
Representatives of OPEC’s 18 nations recently met in Doha, Qatar. Among their topics of discussion was whether to freeze oil production levels.
The nations didn’t reach an agreement on the subject.
“OPEC and Russia and various countries met and decided they weren’t going to freeze oil and, in fact, OPEC said they will increase production again. This will drive the price down to $26 (a barrel) again,” said oil producer Tom Cambridge.
The U.S. currently is enjoying a record level of energy production. Between 2008 and 2015, oil production in the U.S. increased by nearly 4.5 million barrels a day.
The increased production had a predictable effect on imports. Light crude oil imports to the U.S. declined from 2.2 billion barrels a day in 2010 to 625,000 barrels a day in 2014.
It’s easy to see why OPEC countries didn’t reach an agreement on freezing oil production. They want plenty of oil to be available on the international market to bring down oil prices.
When the prices get low enough, it hurts American oil producers and hinders domestic production of oil.
This isn’t the first time OPEC has played this manipulative game and engineered economic havoc in Texas — and elsewhere in the U.S.
In the past, after they have lowered our production levels, the OPEC countries haven’t had any difficulty reaching an agreement to freeze production.
At that point, they will want to increase oil prices by lowering the supply of it.
It’s time to stop this tactic, and the Panhandle Producers and Royalty Owners Association have the right idea.
If oil imports to the U.S. are limited, it means more companies will be buying the oil that’s produced here.
Many American producers have taken economic risks to be part of the record energy production in the U.S. They shouldn’t have to suffer at the hands of greedy foreign oil interests.
Could the Panhandle Import Reduction Initiative be successful? We don’t know, but the Panhandle oil producers are doing the right thing to try. There should be a market for the oil that’s being produced in the U.S. Source.