IEEFA U.S.: IEEFA Director of Finance urges oil production cuts at Texas Commission Hearing

April 14, 2020 (IEEFA U.S.) – At a public hearing held on Tuesday by the Texas Railroad Commission (RRC) closely followed by industry experts and analysts, IEEFA’s Director of Finance, Tom Sanzillo urged production cuts (“prorationing”) to deal with the ongoing turbulence and oversupply in the oil and gas sector. 

“The problems of oversupplied markets and low prices, aligning interests within the industry, technological competition and the changing composition of economic growth predate the coronavirus outbreak and will persist long after the pandemic passes,” he said.

In response to the pandemic, the hearing was held remotely and streamed to a public audience via live video feed. IEEFA had previously submitted written comments to the Commission on April 7. 

Sanzillo reminded the Commissioners that from 1970 to 2000, the energy sector led the market occupying 28% of the S&P 500, today representing only 2.9%.  

He added that the structure of demand for oil and gas is undergoing “massive transformation” nationally and globally.  Even as energy demand grows, he said, the markets that serve that demand are expanding beyond the oil and gas and industry. 

Sanzillo encouraged the RCC to address, not only the short-term supply glut but also the longer-term issues of an industry in decline and a sector in transition.

“Any short-term fix designed by the RRC, or government support for additional storage capacity, will return markets, not to the previous status quo, but to a reduced level of chaos in the oil and gas markets and the finance sector,” he said.

Tom Sanzillo is IEEFA’s director of finance.

Full testimony: IEEFA Statement in favor of the Texas Railroad Commission’s adoption of production goals for the oil and gas industry 

Written comments: Comments Submitted to the Railroad Commission of Texas on the Matter of the request for determination of reasonable market demand

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About IEEFA

The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.