Texas Railroad Commission

I have opened a new category on this blog called “Phaseout Profit Theory”. I plan to collect posts discussing this idea in the new category. For an introduction to the idea look at this post from two days ago, also titled “Phaseout Profit Theory“.

I just read the 2012 report “Europe facing peak oil” by – Benoît Thévard, commissioned by the Greens in the European Parliament. It is full of interesting facts. I recommend reading it.

I learned from that study about the Texas Railroad Commission (page 27). Looking for details at Wikipedia, I found that they regulated the price of oil between 1930 and 1971.

The reason they started doing this was the “East Texas oil boom” triggered by discovery of the East Texas Oil Field. That brought oil prices down to 25 cents a barrel. After some lively discussions involving the Texas State militia, the Texas Railroad Commission started to hand out quotas to all oil producers. From the Wikipedia article:

 Texas oilmen decided they preferred state to federal regulation, and wanted the TRC to give out quotas so that every producer would get higher prices and profits.

That system was a model for the later OPEC. And it shows that the oil industry has a clear precedent for restricting production in the interest of making more money.

Which is of course exactly what they should do now again. Their interest in making more money from their oil actually is aligned with that of the climate environment movement. Both want less oil in the market, even if for different reasons.

Rex Tillerson, CEO of ExxonMobil, had this to say in a recent interview:

My philosophy is to make money.

That’s exactly what is to be expected. And that’s exactly why the Phaseout Profit Theory needs some attention. It has the potential to completely change the political landscape for fossil fuel regulation.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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