The Texas Origins Of OPEC
LULU GARCIA-NAVARRO, HOST:
The coronavirus shutdown has thrown the U.S. oil industry into a crisis. Demand and prices have cratered. There's such a glut of oil that companies are running out of places to store it. This week, Texas regulators will consider actually capping how much oil can be pumped. That idea may be hard to imagine. But as Mose Buchele of member station KUT reports, Texas has a long, colorful history of fixing crude prices.
MOSE BUCHELE, BYLINE: The year is 1930. The place is East Texas. The story starts with the discovery of a really big oilfield.
DON CARLETON: I mean, this was a monster.
BUCHELE: Don Carleton is the director of the Briscoe Center for American History.
CARLETON: And the discovery well really set off an oil rush.
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BUCHELE: Hundreds of wildcatters rushed the field.
CARLETON: You know, they would go and pick a place to go drill a hole in.
BUCHELE: And they kept striking oil. There was too much to store, no easy way to get it to market. And there was another problem.
CARLETON: This is the depth of the Depression. So demand was way, way, way down. In fact, there was hardly any demand.
BUCHELE: This part might sound familiar. The collision of massive supply with almost no demand cratered oil prices. Oil went to 5 cents a barrel. But the wildcatters kept on pumping.
CARLETON: And there was no coordination, no regulation, even though the Texas Railroad Commission was empowered to do something.
BUCHELE: That's right. The Railroad Commission is the agency that regulates Texas oil and gas. And by 1931, big oil companies demanded that the Commission act. So it ordered the wildcatters to stop pumping. Now, how do you think they took that?
CARLETON: All of the small independents rebelled and just simply thumbed their noses, you know? You and whose army is going to stop us?
BUCHELE: That's when the governor sent 800 National Guardsmen and a company of Texas Rangers.
CARLETON: And they literally have to pull out their rifles with bayonets to go and check and make sure that their wells were shut down.
BUCHELE: Eventually, the troops were replaced by Railroad Commission staff. But this was during Prohibition. A lot of people had become very good at transporting illegal liquids. Decades later, Joe Kinsey talked about it for the East Texas Oral History Project.
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JOE KINSEY: These little refineries were - they paid cash for the oil when it came in. And they sold the gasoline for cash. So there's no record made of anything.
BUCHELE: Eventually, the Railroad Commission gained control. And its power grew. It started working with other states to set production levels and prices, not just in the U.S. but around the world.
DAVID PRINDLE: So from the 1930s until 1972, essentially, the Railroad Commission was the most important institution in the world of oil.
BUCHELE: David Prindle is a government professor at UT Austin. He says in 1951, the head of Venezuela's energy sector looked to Texas for inspiration.
PRINDLE: He hired the chief engineer of the Railroad Commission, named Jack Baumel, to come to Venezuela and show him and then show the oil minister of Saudi Arabia how it was done.
BUCHELE: It was the start of the Organization of the Petroleum Exporting Countries.
PRINDLE: OPEC was explicitly modeled on the Texas Railroad Commission.
BUCHELE: As more oil was found around the world, OPEC gained power. And the Railroad Commission lost it. The commission stopped capping Texas production in the early '70s. And it's never even considered it again until now, amid an economic crisis and a huge glut of oil, a lot like they had back in 1931. For NPR News, I'm Mose Buchele in Austin.
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