Hazardous Business
Industry, Regulation, and the Texas Railroad Commission
The Railroads Come to Texas
The Fight for the Commission
John H. Reagan and Early Regulation
The Oil Wars
The Power Years
Other Responsibilities
The Railroad Commission Today

The Power Years

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The Rising Tide of Foreign Oil

The full-scale production and enormous demand for oil masked a historic shift for Texas and the United States. In 1948, the United States for the first time became a net importer of oil. Although domestic production was at full-tilt for most of the 1950s, it was shrinking each year as a percentage of the oil Americans consumed in a year.

In 1951, the United States got a taste of what it meant to be dependent on foreign oil. That year, the government of Iran nationalized its oil properties, closed the refinery at Abadan, and took one-half million barrels of supply off the market. Texas production was able to fill the gap, and the incident barely registered on most Americans. Similarly, few Americans paid much heed to a 1955 presidential investigation that found that U.S dependency on imported oil constituted a threat to national security. Over the next 15 years, eight more investigations would be conducted, all coming to the same conclusion.

Magnolia plant, 1956

The next major Mideast crisis, in 1956, had a much higher public profile. Egyptian president Gamal Abdal Nasser nationalized the Suez Canal, an action that sparked an international crisis and combined military action against Egypt by Great Britain, France, and Israel. During the crisis, Texas production once again reached record levels as American oil companies delivered emergency supplies to Europe.

The Railroad Commission Reacts

During these years of great prosperity and looming threat, the Railroad Commission was active in a number of areas. The commission encouraged the development of technology that would allow drillers to reclaim oil that had been left in the ground during the earlier days of ruthless exploitation of older fields. These efforts came to fruition in the late 1960s, when a method was found to recycle the salt water that is a byproduct of oil drilling to repressurize old fields.

The commission also demonstrated a genuine concern for conservation. It discouraged refiners from producing inefficient high-octane gas that did not improve auto performance and campaigned for more fuel-efficient automobiles.

By 1957, the impact of imported oil could be seen in Railroad Commission orders and production allowables. The oil market was glutted with foreign crude. Because of the glut, the majors no longer needed or wanted as much Texas oil as they had purchased in earlier years. To keep prices at a level at which producers could still make money, the commission reduced the number of days of allowable production from 30 to 21. Still prices continued to be depressed. Over the next five years, allowables fell again and again. As production fell, Texas could no longer count on the petroleum tax revenue it had once received from oil. In 1961, the state was forced to implement an unpopular sales tax to make up the difference.

By 1962, the number of days of allowable production stood at just seven. The commission then changed its rules from days to a percentage allowable, resulting in an increase in production. The commission had no control over the complex forces that were crowding Texas to the margins of the world market. By 1965, only half of the wells that had been pumping a decade earlier were still in service.

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Page last modified: August 18, 2011