The Dallas Morning News reported that the Texas Railroad Commission is holding off on implementing a coordinated cut to oil production. Two of the agency’s three members, who are all Republican, said they were not ready to make the market intervention maneuver. The measure, proposed as a means of supporting domestic producers amidst the global oil glut, comes after a 10-hour hearing last week.
Arguments in favor of production cuts centered on the severity of the current crisis and the need to protect jobs. Ryan Sitton, the lone commissioner currently in support of proration, stated:
“We’re seeing a level of demand destruction and oil industry downturn that in the past happened in the course of years, happening in the course of days.”
Arguments against the proposal cited the danger of setting a precedent for government intervention in private industry, especially when such interference could be more harmful than helpful. Todd Staples, President of the Texas Oil and Gas Association, said:
“Government control of Texas oil production is not the answer… The Texas market is already responding to low prices and depressed demand with greater efficiency than a government-controlled system can and with less damaging consequences than those we would experience from government-imposed controls.”
However well intentioned, the Texas Railroad Commission was right to hold off on government mandated production cuts. The rapidly changing nature of the oil crisis requires that producers have the flexibility to respond efficiently and without additional obstacles. Government agencies should partner with industry leaders to find free market solutions that require minimal interference.