Responsible producers don’t need mandatory regulations by the Texas Railroad Commission to balance supply and demand.
Marathon Oil stands firmly opposed to the petition to prorate domestic oil and gas production in Texas. We do not believe proration in Texas, that is, requiring a broad reduction in oil production, will have the desired effect — or any meaningful effect — on global oversupply, and we believe this action would only serve to disadvantage Texans.
I believe the efficiency and competition inherent in the free market system benefits Texas consumers and consumers around the world. It is the engine for innovation and entrepreneurship and is responsible for creating the U.S. energy renaissance we all now enjoy.
Responsible producers don’t need mandatory regulations by the Texas Railroad Commission to balance supply and demand. In fact, U.S. producers have acted first and responded strongly with sweeping budget and production reductions already underway.
It’s true that supply and demand imbalances will occur, and in these times, some companies will succeed and others will fail. So we have to ask, what will be the threshold to toss aside free market principles in the future? Companies with financial flexibility and a sound strategy will emerge from today’s unique challenges stronger than before. Artificial market manipulation by Texas will not help build this strength.
There have been suggestions that if all the oil producing states act in concert, we would be able to more appropriately address the global oversupply. However, the Texas Railroad Commission has no authority to ensure other states follow them. It also presupposes that the regulator, not the operator, is best positioned to make curtailment decisions and that the regulator can implement such reductions in a fair and equitable manner. I am stunned that we have business leaders today so willing to hand over control of their enterprises to government regulators.
As an independent exploration and production company proudly based in Houston, we operate across this great nation in Texas, Oklahoma, New Mexico and North Dakota. To put it simply, we believe Texas proration is a false choice and offers no solution to the current supply and demand disconnect that can only be addressed by the free market adjustments already in play and a return to normalcy by the world’s economies.
I believe the best solution to our current crisis is to get the world healthy and back to work, while not abandoning the free market principles that have created US energy independence.
Lee Tillman is chief executive of Marathon Oil Corp. He wrote this column for The Dallas Morning News.