A deal to cut global oil production might stop the free-falling price of oil — but for some producers in Texas, it’s too little too late: they’re facing economic ruin.
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Independent oil and gas producers in Texas stand on the edge of ruin. Prices remain very low despite an OPEC deal cutting production. Big U.S. oil companies may be famous for their income and their power, but independent producers are much more vulnerable. NPR’s Wade Goodwyn reports on what they face.
WADE GOODWYN, BYLINE: Want a quick tell of the poker hand the world economy is holding? Watch oil prices.
KIRK EDWARDS: Here in West Texas, we’re fighting two wars at once – one with the Saudis flooding the market to punish the energy producers in the state and the other with the COVID virus.
GOODWYN: Kirk Edwards is the owner and president of an Odessa, Texas-based oil company and former chairman of the Permian Basin Petroleum Association. Last year, the Permian Basin in West Texas became the world’s largest-producing oilfield, surpassing Saudi Arabia’s Ghawar Field by 300,000 barrels a day. But with the world economy going to hell in a handbasket, the demand for oil has all but collapsed. Edwards says the Saudis have used the coronavirus pandemic as an opportunity to damage their rival.
EDWARDS: Yes, they definitely came after Texas. Saudi leased 40 supertankers, filled them full of oil – which caused the price of supertankers to go from $40,000 a day to over $200,000 a day – just to load them up and bring them to the Texas Gulf Coast just so they could flood the market. And it’s just – we need some help from the administration to help defend this industry because it’s going to be dismantled in a one-month period of time.
GOODWYN: From the wellheads in West Texas to the corner offices in Houston, job losses will likely be counted in the hundreds of thousands. James West is a senior managing director at Evercore, a global investment banking advisory firm. West says the Saudi-Russia agreement will give the markets a bump.
JAMES WEST: I think it’s certainly a constructive agreement, although what OPEC and OPEC Plus are trying to achieve is unlikely to arrest the dramatic loss of demand that the economy is seeing right now. So it’s a good effort; it’s not enough.
GOODWYN: Futures of West Texas intermediate crude have gotten close to within single digits a barrel. With supertankers full of Saudi oil and storage tanks full of Texas crude, there is simply no place for it to go when it gets to the end of the pipeline. The world is awash.
LORI BLONG: We have lived the cycles of booms and busts.
GOODWYN: Laurie Blong is a Midland city councilwoman who co-owns with her husband Jared Octane Energy, an oil and gas service company. For a hundred years, West Texans have ridden the angry bronco of oil economics. It would be hard to find a collective with more perspective on the ups and downs of life. Often they’ve walked off with their pockets stuffed with winnings, but every once in a while they’re on the ground and that crude oil horse is stomping on their rib cage hard as he can.
BLONG: So every conversation that you have with people who’ve been in the oil and gas industry long term know that a bust can always be just around the corner. But you can’t really prepare for a scenario like we’re in right now. This is too low for oil prices to go for a lot of companies to be able to sustain long term.
GOODWYN: The economics of shale fracking were already fragile well before this coronavirus pandemic hit. The wave of bankruptcies in America’s domestic oil industry are underway, and international production cutbacks notwithstanding, there is little anybody can do to stop it.
Wade Goodwyn, NPR News, Dallas.
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