The Big Conversation
Rapidly falling oil prices might have drivers grateful at the gas pump, but indicators continue to grow that this lower price per barrel will soon have a significant impact on oil production.
The Moody's credit rating service said on Tuesday that oil producers might be looking at a 20 percent drop in activity next year because of lower commodity prices. "If oil prices stay at around $75 through 2015, companies will have to cut the amount of money available for reinvestment," according to a report by The Hill's Laura Barron-Lopez. "Moody’s expects offshore drilling to take a larger hit than companies with a sizable stake in the active Texas Eagle Ford and North Dakota plays."
Also on Tuesday, the Texas Railroad Commission released its October report on drilling activity, showing 31 fewer drilling permits issued from the previous month. One month's worth of data hardly constitutes a trend, but The Dallas Morning News' James Osborne notes analysts' predictions of a slowdown in Texas should oil stay below $80 per barrel.
Couple that with widespread expectations that OPEC won't act to curtail production at its Vienna meeting this week, meaning oil prices could fall further. Ryan Holeywell of the Houston Chronicle reported that at least one analyst is raising the possibility of $70-per-barrel oil:
"Since late 2011, OPEC hasn't had specific country quotas, instead setting an overall production ceiling of 30 million barrels per day. Output is slightly higher than that now, and some analysts have expressed skepticism that members could even agree to rein it in to the existing ceiling ... For Saudi Arabia, there's upside to falling crude prices. Lower prices could force a reduction in competing U.S. production; cause pain for cash-strapped Russia and Iran, Saudi rivals that rely heavily on oil sales; and help a struggling global economy — boosting longer-term demand for the Kingdom's oil."
Reduction in U.S. production would have an outsize impact in Texas, where extraction activity in the Eagle Ford, Permian Basin and elsewhere have boosted the economy overall and helped swell state revenue coffers. A long-term adjustment downward in price would naturally have an effect, the extent of which would be difficult to gauge right now.
The Brief will take a couple of days off for the Thanksgiving holiday but will return on Monday, Dec. 1.
The Day Ahead
Hotter, Drier Projections Threaten Texas Miracle, by Neena Satija
Losers Blame College Voters for Denton Fracking Ban, by Jim Malewitz
Court Declines to Stay Panetti's Execution, by Jim Malewitz
Last Contested Vote for Texas House Speaker Was in 1975, by Aman Batheja
Texas Medicaid regulators hit with legal setback, Austin American-Statesman
Texas asks judge to uphold gay marriage ban during appeal, Houston Chronicle
Hundreds in Austin join Ferguson protests across the nation, Austin American-Statesman
New statewide land position aims for more public ed funds, Corpus Christi Caller-Times
After Obama’s Immigration Action, a Blast of Energy for the Tea Party, The New York Times
Quote to Note
“I know every special-interest group wants to protect its tax break, and members want to continue to dole out all the goodies. But hey, my kid wants a pony. It doesn’t mean someone doesn’t have to pay for it.”
— Maya MacGuineas of the Committee for a Responsible Federal Budget, arguing against federal legislation that would give out $440 billion in tax cuts and has earned a veto threat from President Obama
Today in TribTalk
Why Texas Democrats shouldn’t give up hope, by Cliff Walker
Trib Events for the Calendar
• A Conversation With Reps. Myra Crownover, Tan Parker and Ron Simmons on Dec. 1 at Texas Woman's University in Denton
• A Conversation With Lt. Gov. David Dewhurst on Dec. 4 at The Austin Club
• The Texas Tribune Festival presents a one-day symposium previewing the 84th Legislature on Dec. 5 at the Austin Community College Highland Campus in Austin
• A Panel Discussion on the Transformation of Medical Education in Texas, on Dec. 9 at the UT Health Science Center in San Antonio.
• Meet the New Guys: A Conversation With Incoming Members of the Texas Senate on Dec. 11 at The Austin Club