Many oil and gas royalty owners in Texas have been hit hard by declining oil prices. Some of our clients at Woodall Batchelor PLLC have asked what they should expect near-term with regards to oil royalties. Oil price fluctuations are sensitive to several factors like geopolitical turmoil, economic output, and consumer demand. Recently, the United States of America has increased its oil production significantly. Oil production in the US exceeds nine million barrels of oil a day. Relative to Saudi Arabia’s oil output of 10.22 million barrels per day, the US has quickly become one of the most significant oil players in the world. The drive for oil independence in America has resulted, though, in reduced oil prices because of the increased supply.
Geopolitical issues also impact oil prices. The Middle East is a particularly volatile area of the world. It also happens to be the highest oil producing region. Regional divisions in the Middle East have created cracks in the once-unified OPEC governing body. Because of conflicts between OPEC member states, the group has been unable to place restrictions on oil output like they have in the past. This hinders them from being able to control prices. As OPEC nations fight over market share and the price of oil plunged, many oil producers in the United States had to cease operations or shutter. Some oil companies operating on leverage were unable to make loan payments based on lower oil prices and had to declare bankruptcy. The disruption in the US saw many oil royalty owners receive lower payments.
There are positive signs in the Texas oil market. Recently the state has seen increased development activity in oil and gas. Lease and drilling numbers are on the rise. While oil prices are still well away from the highs of years past, it’s important to remember that commodity prices are cyclical in nature. Oil prices will likely rebound higher in the future. The recent market ups and downs serve as a good reminder to save when times are good.
Recent emphasis by state and federal governments on energy dependence could help create more activity in Texas oil and gas. People’s tolerance for a small number of countries that make up OPEC to essentially control global oil prices has dwindled. It’s unlikely the US will abandon its push for energy independence anytime soon. As domestic oil production continues to grow, we can expect the federal government to become more involved in regulating the sector.
Working with a knowledgeable attorney can help make understanding the oil markets and their impact on royalty owners easy. At Woodall Batchelor PLLC, we have experience navigating public policy changes and their impact on our clients. We can help royalty owners protect themselves from wild swings in oil prices and any new developing regulation. Our staff has experience with litigation in the event of any royalty-related dispute that ensures our clients have the best representation possible to protect their assets.
To educate yourself further on these issues, be sure to reach out to our energy-sector focused attorneys here at Woodall Batchelor.