We, as producers, the state and the country, must do all that we can to protect our ability to produce domestic oil.
Almost every day over the last few weeks, the words of William B. Travis at the Alamo keep popping into my mind: “I now want every man who is determined to stay here and die with me to come across this line.” Our producers in the Permian Basin are under attack. That is not hyperbole. We are in a price war with the Russians and the Saudis. That price war may have begun with them. The focus of that war, however, is now with U.S. producers, and in particular with, Permian Basin producers. That point is abundantly clear from all recent reports.
It is not our first fight with foreign producers. Some remember the 1973 Arab oil embargo. Many remember the 1980s oil price collapse. All of us remember the 2014-2015 price war. We won, but as with any war, there was destruction.
What makes this one different is that we are also fighting an invisible enemy, the coronavirus. It has shut down economies and destroyed the demand for oil. The impact on Permian Basin and nationwide employment will be devastating.
On March 27, the U.S. Department of Labor released weekly unemployment insurance claims data for the week ending March 21. Nationally, new jobless claims leaped more than 3 million – the largest weekly increase in history. In Texas, new claims rose from 16,176 to 155,657. And, unfortunately, if we don’t take serious action to fight an unprecedented threat, this will only be the beginning of our economic challenges.
While the first wave has resulted in a dramatic price change for production, the next wave in this battle is going to be storage. The pipelines began sending letters to producers last week to cut production because they have no place to store the oil.
As Travis sent letters for help, you should know the Permian Basin Petroleum Association has been calling upon our elected officials, including the White House and the governors of New Mexico and Texas, for reinforcements. Unlike Travis, we are getting help. You should know that Congressman Jody Arrington (R-Lubbock) and Sen. Lisa Murkowski (R-Alaska) have become the leaders in responding to those calls. You should know several other members of the Texas delegation have responded, as well. We greatly appreciate those efforts.
We are not asking for a bailout. Our free-market principles make that a bridge too far. The stimulus bill proves that point. We appreciate the Small Business Administration loan program which was included. We hope people make appropriate use of the program’s availability.
Here are some of the “asks” that we have made:
–Use the full force of the United States of America to demand that the Russians and the Saudis stop their flood of cheap, government-subsidized oil into the world markets.
We are working hard to explain the need for President Trump and Secretary of State Mike Pompeo to aggressively intervene to protect domestic producers and that they have tools in their toolbox –ranging from tariffs, import licenses and other trade restrictions to investigations, safeguard actions and sanctions — to protect domestic producers.
–Fill the Strategic Petroleum Reserve with domestically produced oil.
Please do not fill it from the world oil market with foreign-produced oil.
–Remove the tariffs on steel used to produce domestic oil.
Permian Producers are price takers. All we control are costs. A 25 percent tariff on the steel we use is a cost now and especially when we begin to come out of this war. We received partial relief here last week when President Trump lifted all tariffs for three months.
Unlike Travis, we will win this war. That is not to say there won’t be any casualties. The United States is the No. 1 producer in the world because of the technology, innovation and hard work of Permian Basin producers. We, as producers, the state and the country, must do all that we can to protect our ability to produce domestic oil. We understand that low gasoline prices are a bright spot in the current economy, but we also understand if we lose this war, then gasoline prices will go up and we all will be subject to another Arab/Russia oil embargo.
The future of the domestic oil and gas industry, thousands of jobs and the recovery of the United States economy are at stake here. We need help, and we need it now.
Ben Shepperd is president of Permian Basin Petroleum Association.
Read it from MRT – Photo as postes on MRT ( The Oilfield Photographer Inc./The Oilfield Photographer, Inc. )
