SAN ANGELO, Texas — It wasn't long ago that Texans were celebrating the Lone Star State's takeover of the oil industry. In 2019, the state accounted for 41% of the nation's crude oil production, and the 30 petroleum refineries in Texas were able to process about 5.8 million barrels of crude oil per day.
However, after oil prices dropped into the negatives this week for the first time in history, it's Texas that is going to take the brunt of the blow for the United States.
“I don’t think you can overstate how important it is, given the impact of the statewide tax revenues off of oil and gas production taxes fund a significant part of our state government. The direct economy in West Texas is almost totally reliant on crude oil production. It would be difficult to overstate how important it is," Dist. 11 Congressman Mike Conaway said.
According to Conaway, the usual worldwide demand for oil and gas is approximately 100 million barrels per day. Currently, the demand stands at approximately 70 million barrels per day.
“If you have a commodity, no matter what it is, if you’re using 100 of it, and then you start using 70 of it when the supply line is based on the production of 100 and it was meeting that, then you have 30 (million) barrels a day of oil that can’t go anywhere. It’s not being sold, everything starts to back up. So, when you have an oversupply like that, you’re going to get a natural drop in the price, and this time it was pretty significant. Earlier this week we saw oil in the negative price, which theoretically means if you have a tanker come pick up your oil, you have to pay that pipeline person for taking the oil off of your lease," Conaway said.
Oil companies were already under pressure from lower oil and natural gas prices after Russia and Saudi Arabia flooded the global energy market with oil after disagreeing on production limits. This caused the price of imported oil to drop 27%, according to the U.S. Bureau of Labor Statistics. Which is why Conaway, along with other members of Congress, are urging the government to investigate Saudi Arabia's activity.
“It looks like Saudi Arabia was dumping. They have 40 million barrels of crude oil sitting on the gulf of Mexico awaiting offloading onto U.S. ports. Some of that was contracted in March, for April and May delivery runs through the refineries, but 40 million barrels is three times what they would normally run through our refineries in a month. So, that looks to me like a dumping case that has occurred. So, we’re going to ask the congress department to open a case against any country that dumps oil into our markets, to see if they’ve done something wrong," Conaway said.
The government proposed using $3 billion to buy U.S. oil and hold it in the Strategic Petroleum Reserve, which is the world's largest supply of emergency crude oil. Conaway said although he thinks the government should follow through with that plan, it will hardly save the oil industry.
"Right now, that reserve has about 77 million barrels of extra capacity. In other words, in order for it to get full, it would need 77 million barrels. At our peak, we were producing about 13 million barrels a day. 77 million barrels of storage would be about 7 days of production if all of our production went into storage, so, as you can see, it's not a panacea, it's not a silver bullet, but it is an important strategic asset that we should have in place," he said.
At a White House press briefing, President Trump said he was considering the move “based on the record low price of oil,” and that the action would “top [the SPR] out.”