Guest “can he do that?” by David Middleton
Trump says US will ‘help Mexico along’ with its OPEC+ production cuts
PUBLISHED FRI, APR 10 2020
President Donald Trump said on Friday that the United States would “help Mexico along” with oil production cuts that it is meant to make under a global deal to shore up slumping crude oil prices, but said the details had yet to be worked out.
The comments suggest that Trump could be considering an unprecedented effort to orchestrate a production cut in the United States, historically the world’s most vocal proponent of the free market.
President Lopez Obrador said earlier on Friday that Trump had agreed help out by cutting additional U.S. output after Mexico offered OPEC+ a cut of just 100,000 bpd, a quarter of what the group demanded. He said Trump “very generously said to me that they were going to help us with the additional 250,000 (bpd) to what they are going to contribute.”
Trump had been a vocal proponent of global supply cuts, seen as crucial to saving the U.S. drilling industry from collapse, but has resisted calls that the United States also orchestrate a reduction in supplies – saying U.S. drillers were already slowing their output for economic reasons.
U.S. laws forbid companies from colluding to reduce supply and raise prices, but does not prevent the government from ordering such supply reductions.
While some state regulatory agencies, like the Texas Railroad Commission do have the power to restrict oil & gas production within their respective jurisdictions, I am not aware of any comparable powers at the Federal level. How could President Trump deliver on promises to cut US oil production? Well, Al Arabiya has the answer…
Coronavirus: Can the US government enforce oil output cuts along with Russia, OPEC?
Tom Ashby, Al Arabiya English Saturday 11 April 2020
This raises the question of whether the government actually has the legal power to enforce a production cut by its industry. Members of the Organization of the Petroleum Exporting Countries (OPEC) can instruct their state companies to reduce output, and where the oil is produced by private companies, they generally have clauses in their production agreements allowing the government to impose cuts.
In the United States, the situation is significantly more fragmented. The federal government has jurisdiction over offshore oil production in the Gulf of Mexico, while independent state commissions regulate the onshore industry in most oil producing states.
Most of these commissions have powers to regulate oil production in their states, in particular through their powers to prevent waste and pollution, according to industry analysts.
However, some analysts do not expect the US to take this approach.
“I don’t expect it to work like that,” said Roger Diwan, Vice President of IHS Markit. “They are just forecasting a decline in production because of low prices,” he added.
The US Energy Information Administration (EIA) on April 7 revised its forecast for US oil production down to 11.8 million barrels per day (bpd) this year, a fall of 500,000 bpd from 2019. In 2021, the EIA expects US crude production to decline further by 700,000 bpd.
“If realized, the 2020 production decline would mark the first annual decline since 2016,” it said in its latest short-term energy outlook.
In the oil cut talks, negotiators have been using much larger estimates of the decline in US output.
Al Arabiya English
I would not be surprised to see US oil production fall by 2 million bbl/d from the 2019 peak by early 2021. So, President Trump just delivered a Josey Wales promise to Mexico and OPEC+…
Ten Bears : These things you say we will have, we already have.
Josey Wales : That’s true. I ain’t promising you nothing extra. I’m just giving you life and you’re giving me life. And I’m saying that men can live together without butchering one another.
The interesting part will be to see how the President plans hold US production down when prices begin to recover.
Day 25 of America Held Hostage by ChiCom-19
Dallas County numbers as of noon today…
|% of population with||0.0623%||0.00102%|
|% with, rounded||0.1%||0.00%|
|% without, rounded||99.9%||100.00%|
|Menodoza Line (.200)||5-Mar-2034||0.200|
We can now expect 20% of the county to test positive for ChiCom-19 by March 5, 2034.
At the State level…
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