State shouldn't become OPEC

Oklahoma should not become OPEC. Nor should Texas or any other U.S. state become price-fixers or supply manipulators like the infamous Organization of Petroleum Exporting Countries.

During a crisis, like today in America's oil industry and multiple other sectors, principles too often are abandoned, making things worse in the long run.

Americans will forever debate whether the coronavirus pandemic was worsened by government-mandated shutdowns, strangling the economy and the demand for energy. Not even government can borrow and spend enough money to repair that damage.

Now some in the oil industry have asked regulators in Oklahoma and Texas to place limits, OPEC-style, on how much oil can be produced. Their applications call it setting allowables or prorationing, but in street talk that means quotas.

This is a reversal from the industry's history of complaining, very often rightfully, about over-regulation.

But when government sets quotas, it's worse than the adage about picking winners and losers. It's deciding who can even try.

Oklahoma is blessed with three fine individuals on the Corporation Commission, which would make these decisions. But not even King Solomon could create a good quota system. Nor could an expanded bureaucracy that would be necessary even to try creating one.

Decrees would dictate who is allowed to produce oil, how much, when and where. Others would be banned

— like ordering them to stay at home.

A quota system is rife with potential abuse. Would those who applied first get to produce? Those who somehow show the most “need"? Those with the highest overhead to cover? Or those with the lowest expenses and highest efficiency? Perhaps those who have been in business the longest? Or maybe those with the most political clout. Certainly lobbyists and lawyers would be kept busy.

Suppose everyone were given an across-the-board percentage (50%? 30%? 10%?) of what they had produced at some arbitrary date in the past. Then all would be unhappy at being restricted and those with more recent investments would be shut out.

The changes would never stop because when America's economy rebounds, constant adjustments of quotas would be sought, with constant temptations to tweak them to manipulate prices.

And if government dictates the supply and demand of oil, then what's next? Maybe wheat?

The oil and gas industry is vital to Oklahoma and the country. It deserves appreciation, support and help. But quotas are not the way to do it; it would be abandoning any pretense of a free-enterprise system.

Beware. This could become the messiest thing in Oklahoma's oil patch since the blowout of the Wild Mary Sudik.