Self-sufficiency in Oil: I. The United States
O nce a month -- usually on a Friday morning, in one of the public rooms of the Commodore Perry Hotel in Austin, Texas -- three professional public servants of the State of Texas decide roughly how much oil the world's largest single private industry shall produce during the next month. Their decision is not concerned with prices, but it is based partly on estimates of market demand, which means demand at existing prices: as such, indirectly, it does provide a powerful though not absolute support to the level of crude oil prices charged in the American oil industry. The Texas Railroad Commission, again, is concerned only with the 'proration' of crude oil output according to the maximum rate of efficient production and to reasonable market demand inside Texas: there are other regulatory bodies to set output rates in other oil-producing states, and a number of states in which production is not controlled at all. But Texas is the largest producing state, with about 35 per cent of current output in the United States and about 47 per cent of the country's proved reserves. And experience has shown that Texas, as the fully-regulated largest producer, acts as the stabilizing balance-wheel for total American oil production. When demand goes down, Texan output goes down most; when demand rises, Texan output follows upward too, but less sharply. This last point does not please Texas producers, who feel they benefit less on the roundabouts than some less self-disciplined oil- producing states. But with their larger production, they would stand to lose much more heavily on the swings if total production were allowed to rise much above market demand and prices were to collapse.
To the foreign observer, who is frequently lectured by American oil companies operating overseas about their utter and immutable opposition to anything approaching state control or the protection of indigenous fuels against low-cost imports, it is somewhat paradoxical to find that in the United States these companies, and a host of smaller,
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