Everyone can see that the price of gas is cheaper, but what might not be as obvious is that hundreds of thousands of people have lost their job because of it. The price of crude oil has crashed from over $100 per barrel in 2014 to as low as $27 per barrel. Globally, petroleum companies have cut more than 320,000 positions since the downturn began. Texas has already lost 84,000 upstream oil and gas production jobs, which is 27.5 percent of the total.
To protect American jobs, the U.S. should support the price of oil as it has done throughout its history. The price of oil is mainly determined by supply and demand. The recurring problem is that, when the price of oil declines, the oil producers produce more to make up for the smaller profit margin, which in turn further increase supply and decrease price. This is one of the reasons the U.S. and the states historically restricted the supply of oil to keep price stable.
It started with the Railroad Commission of Texas prorating oil in the 1930s. UT government professor David Prindle wrote in his book, “Petroleum Politics and the Texas Railroad Commission,” that “the Commission permitted only enough oil to be drawn out of the ground to satisfy the current demand at the current price.”
Later on, the oil producing states formed the Interstate Oil and Gas Compact Commission, led by the Railroad Commission of Texas, to coordinate their proration plans. With the discovery and production of cheap foreign oil, Congress enacted tariffs and import quotas to keep the U.S. oil price from crashing. As a result of these governmental actions, the price of oil in the U.S. was relatively stable from the 1930s through 1970s.
Unfortunately, by the 1970s, the U.S. was no longer producing enough oil to control its price. This role would shift to the Organization of Petroleum Exporting Countries, which often used the price of oil as a weapon, either sending it sky high through an oil embargo or crashing it by flooding the market. Fortunately for the U.S., the development of hydraulic fracturing and horizontal drilling has made the U.S. one of the biggest producers of oil in the world today. Therefore, unlike in the past three decades where we were unable restrict the supply of oil, the U.S. can and should take actions to support the price of oil today.
In particular, we have to keep in mind that the oil price is low right now because OPEC (mainly Saudi Arabia) chose to flood the market with the goal of putting U.S. shale oil producers out of business, which they have been largely successful in doing. The U.S. has an interest in protecting our domestic oil industry and economy, especially when it is under attack by other countries’ deliberate actions. Some may argue that the low price of gas is good for consumers, but recent studies have shown that the economic harm done by the low price has outweighed the benefits.
We have lost thousands of jobs so far, but it is not over yet. Every single day more men and women will lose their jobs and livelihood until the U.S. takes action to support the price of oil.
Hung is a second year law student from Brownsville.