Why the fight over oil production limits in Texas is either side’s to win | Brunswick Group

Why the fight over oil production limits in Texas is either side’s to win

Texas regulators are considering curtailing oil production in America's largest oil-producing state for the first time in decades. Ahead of a hearing by the Texas Railroad Commission on the issue, Brunswick Group recently surveyed more than 1,000 Texans to understand:

  • How is the collapse in oil prices impacting them?
  • How optimistic are they about the Texas oil industry’s prospects for emerging stronger from the current downturn?
  • What do they think of proposals to rescue the industry by shoring up prices – including the proposal that the state require producers to limit their output?

Here is what we learned:

  • Texans are leaning against government-ordered production limits, but many are undecided. As one might expect in a state known for free-market traditions and limited government, four in ten Texans (40%) said they do not want the Texas Railroad Commission to require oil companies to reduce production in the state. Twenty-four percent said they do. More than a third (36%) said they are unsure.
    • Texans who work in the oil & gas industry or have immediate family in the industry are almost evenly divided on production limits. Among those who work in the industry or have family in the industry, 41 percent said the Texas Railroad Commission should limit production in the state. Thirty-nine percent said the Commission should not do so. Among Texans who do not work in the industry or have family in it, nearly four in ten (39%) said they were “not sure” what the Commission should do; only 21 percent said it should limit production.
  • Only 13 percent of Texans say the collapse in oil prices in having a negative impact on them. Nearly half (49%) say the decline in oil prices is not having a significant impact on them. In part, this may reflect the fact that Texas has diversified its economy over the years and is more resilient to oil price shocks than it once was. But it also likely reflects the fact Texas – like other Americans - are traveling less and not feeling the benefits of lower fuel prices (Thirty-eight percent of Texans said the decline is having a positive impact on them).
  • Most Texans are optimistic or uncertain about the industry’s future. Forty-four percent of Texans said they are optimistic Texas producers “will emerge stronger” from the downturn. Almost as many (42%) Forty-two percent said they aren’t sure. Only 13 percent of Texans said they are “not optimistic that Texas oil producers will be able to recover” from the current economic downturn.
    • Texans who work in the oil & gas or have immediate family in it are more likely to be optimistic about the industry’s future than those who don’t. Among those who work in the industry or have family in it, 53 percent said they are optimistic Texas producers will emerge stronger from the downturn. Among those who don’t work in the industry or have immediate family in it, only 43 percent said they are optimistic; 46 percent said they are unsure.
  • Having the federal government buy oil from U.S. producers is much more popular than banning foreign imports. Fewer than two in ten Texans (17%) surveyed think the U.S. government should ban imports of foreign oil to prop up prices in the U.S. Texans are much more receptive to helping the industry by having the federal government buy oil from U.S. producers (35%) – as the Trump administration has proposed – or do nothing at all for the industry (31%), than banning foreign oil imports (17%). Only 14 percent favor reducing royalties that oil & gas producers have to pay the federal government to drill on federal land. Eleven percent say they support easing enforcement of environmental regulations affecting the industry. 

What do these findings mean for oil & gas companies? Here are our takeaways:

  • The battle over pro-rationing is either side’s to win. The fact that more than a third of Texans (36%) say they are “unsure” whether Texas should limit oil production suggests there is time for either side to shape public opinion on the idea.
  • Language matters. While many Texans recoil at the idea of Texas regulators “limiting” oil production, many are receptive to the idea that Texas regulators should “cooperate” with their international counterparts to “stabilize the market.” When asked whether Texas regulators should work with the Organization of Petroleum Exporting Countries to stabilize the market, almost half (51%) of Texans surveyed agreed. The remaining 49 percent said the best way to stabilize the market is to “let competition and the free market rule.” Political affiliation correlated strongly with how Texans answered this question. Those who identified as Trump supporters were much more likely than Democrats to say they favor letting the free market rule.

Download the findings here:

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