Remember the people behind industry
Put those working in oil and gas first, above free market ideology.
Here in Texas, where free market capitalism is a religion, some leaders are showing an open-mindedness we desperately need.
For the rest of the world, the price per barrel of oil is a barometer for economic health. For Houston, the world’s energy capital, it’s a kind of electrocardiogram. When a barrel of dropped temporarily to negative $37, it set off a regional heart attack.
If Houston’s worth is heavily defined by something suddenly deemed worthless, what does that say about our city, about us? It says markets are fickle. Job losses are painful. No industry is impervious. But yes, we still power the world. We just have less time than we thought to find a way to do it smarter.
According to economists at the Federal Reserve Bank of Dallas, the true rate of unemployment in Texas is at least 12.4 percent. The Chronicle’s Erin Douglas reports that the national rate could spike to near 20 percent with folks across the Houston region joining the unemployment rolls.
Mitchell Graffthe co-founder of a small independent oil company. A lean six foot six, he embodies the Texas spirit we celebrate — the risktaking unconventional behind our recent good times. When private equity for exploration dried up in late 2019, though, he had to close shop and went back on the job market. He expected to search for three to six months.
“There is an old saying in oil and gas — good times are good and bad times are bad,” Graff says. He built up his savings during the good times but now he is expecting 12 to 18 months before finding new employment.
In hopes of limiting the carnage, two small companies, Parley Energy and Pioneer Natural Resources, convinced the Texas Railroad Commission to consider “extraordinary, limited and temporary government intervention” to mandate production cuts and thereby stabilize prizes.
For Commissioner Ryan Sitton and Chairman Wayne Christian, opening up that conversation was a big departure from their previous free market evangelism.
Even if the commission acted now to curb production, though, it would be “too little, too late” according to Amy Myers Jaffe, a senior fellow for energy and the environment at the Council on Foreign Relations. The drop in demand for oil is too steep, the world’s storage tanks too full.
Nevertheless, the world was watching Texas. On April 14, when the railroad commission convened online, upwards of 20,000 people in 86 countries and 49 states tuned into a 10-hour meeting. Dozens submitted comments. On one side, Exxon Mobil, Marathon Oil and many others called for the freemarket to sort out winners and losers. The other side included a mix of strange bedfellows.
Environmentalists saw a precedent for an orderly transition to a net-zero carbon future. Others saw a need to protect energy independence and national security. For yet others, it was about preventing the big companies from gobbling the struggling smaller ones and cutting more jobs.
In the end, the commission punted until May by appointing a task force to study options to aid the industry and for the attorney general to weigh in on legal questions.
We urge the Texas Railroad Commission to keep the options open.
Yes, the free market produced the fracking revolution and all its ensuing prosperity but we must do better by the people — the welders, lawyers, rig workers, engineers, geologists, truckers, accountants — who get cast aside and are expected to reinvent the industry once again. We must do better by the neighbors who have had to breathe in air polluted by wasteful gas flaring. We must do better for the whole world on carbon emissions. All these challenges are interrelated. Oil will make a recovery. The question is whether we keep making the same mistakes of excess and deprivation with each swing, and fail to transition over a longterm decline.
According to Mark Finley, a former BP economist and fellow at Rice University’s Baker Institute, oil and gas provided about 55 percent of the world’s energy. Even if the Paris Climate Agreement objectives for cutting carbon emissions enough to limit global warming to two degrees Celsius are met, oil and gas will still constitute roughly 40 percent of the world’s energy.
As he waits this crisis out, figuring out health insurance for his growing family has been Graff ’s biggest challenge. He warns that many won’t be able to hang around. They may leave the industry, and Houston.
“What’s distinctive about Texas is what is above the ground,” says Finley, noting that underground shale resources are found around the world. “The reason the shale revolution hasn’t happened elsewhere is what is above the ground.”
Houston reinventing itself as a different type of energy capital isn’t inevitable. We must take care of the innovators. That means managing our natural resources in a fair way and strengthening our social safety net. Call it socialism if you want but it’s necessary to sustain our beloved free market.