OPEC+ Slashes Oil Production By 2 Million Barrels Per Day. What Does It Mean For Texas?
Tue, October 11, 2022
Last week, OPEC+ announced it will be making one of the biggest oil cuts since the start of the pandemic. This is a highly controversial move that could push domestic gas prices higher and disrupt energy security efforts in Europe and the United States.
During a meeting in Vienna, OPEC+ agreed to cut oil supply by two million barrels per day beginning in November. The contentious decision came as global leaders have requested OPEC+ to increase output as winter approaches and the supply market gets tighter. Earlier this year, the Biden administration went so far as to ask the Middle Eastern nations to increase oil production in the coming months. Given the recent announcement from OPEC+, it appears those attempts failed.
The effects of OPEC+'s decisions are complicated and difficult to fully predict but it’s anticipated that global trade markets, supply chains, and consumers at the pump will likely experience increasing costs and price fluctuations.
Increasing domestic oil and gas production is the only way in which the U.S. can decrease overreliance on external forces like OPEC+ while achieving domestic energy independence and security. Texas is poised to lead the way on this.
As Texas Independent Producers and Royalty Owners President Ed Longanecker recently explained:
“OPEC’s oil output cuts make clear once again why it is so important for the U.S. to encourage domestic oil and gas production and to continue exporting our resources into the global market. Without Texas oil, the impact of OPEC's cuts would be far greater on prices, U.S. consumers and the current energy crisis facing our allies abroad. This year, President Biden implored OPEC to increase production numerous times, while concurrently undercutting domestic production with policies that hinder oil and gas development. It has become painfully evident that we must develop coherent policy to support growing energy demand. Policymakers and this administration must work with the U.S. oil and natural gas industry to support investments in energy infrastructure and domestic production so we are no longer reliant on OPEC and hostile regimes that use energy as a political weapon.”
The Biden administration must stop looking abroad for oil supply to meet the country's demand and start implementing consistent domestic policies. Failing to incentivize the domestic market by putting offshore and onshore leases on hold have only brought more vulnerability and uncertainty to oil prices in recent months.
The Shale Revolution that took place in the United States over the past decade has proven that the industry is capable of providing enough output to stabilize the domestic market while preventing foreign powers from using oil imports as a geopolitical weapon. Before the Covid 19 pandemic, the Permian Basin production levels were even surpassing those of Saudi's Ghawar. While oil and gas markets suffered during the pandemic, the prolific Permian Basin managed to break production records despite increasing federal regulations, supply chain issues and labor constraints.
Now more than ever, it is crucial for the United States to utilize and unleash the full potential of its prolific basins and resource-rich states like Texas. Increasing production will not only bring higher outputs that can address issues of consistent domestic concern like high gasoline prices but also an array of economic benefits to the country.
Texas is the number one oil producer in the nation, responsible for 43 percent of America’s crude oil production, and with the largest continuous oil resource potential ever found located in the Permian Basin. The solution is clear: American energy security is critical to meeting global energy demand, and our allies should not be at the mercy of foreign powers. Energy security starts here in Texas.