U.S. shale producers are the new “swing producers” in the oil market, as many analysts have noted, but the status of swing producer is hugely misunderstood. It is often portrayed as if it confers power and control. In fact, it often means the opposite. The swing producer often becomes the passive absorber of shifts in market supply and demand. Between the 1930s and the 1970s, the role fell to small, independent well owners of Texas, who were forced to limit their production to balance the global oil market. Prorationing orders issued by the Railroad Commission of Texas and conservation commissions in other states compelled owners to restrict output to a fraction of the well’s maximum, and it was not a comfortable experience for the U.S. domestic oil industry. Saudi Arabia found itself cast in the role of swing producer in the early 1980s, an experience that traumatized the […]