Saturday, December 27, 2014

Lex Anteinternet: Lex Anteinternet: $40/barrel?

A couple of weeks ago I posted this:
Lex Anteinternet: Lex Anteinternet: $40/barrel?: Lex Anteinternet: $40/barrel? :   Driven by Saudi Arabian efforts, the price of petroleum oil is falling through the floor.  When I las...
West Texas Light is at $54.73 this morning.  Wyoming's crude, which was at $80/bbl in September is likely below that now.  Rigs are being stacked.

And 2,000 more people left the state this past year than moved in. That's a clear sign. We're in a slump right now, in spite of denial of that by people who are hoping that booms are endless.  Anyone who has lived here for awhile knows this to be the cycle of the industry, and should not be surprised, but no doubt many are.

Of course, this may be a slump, not a crash.  But the local oil economy is just a service economy for existing production if oil is in the $50s.  There's no sign of that changing any time in the near future.


Rich said...

Most of the local drilling activity here in OK started in about 2006 when they started drilling the first horizontal wells. From what little I know, it wasn't fracking that changed oil and gas production as much as those horizontal drilling rigs.

There were wells drilled all over the place (although there are still plenty of places left to drill). Pipelines were also laid everywhere to easily and cheaply transport the oil, gas, and water (so that once the drilling is paid off, the oil and gas can probably still be profitable at a much lower price).

There was also a lot of seismic work done back when oil was closer to $100/bbl (some areas had two or three different seismic surveys over two or three years). I'm not sure if that seismic data means that there will be more drilling in the future or that oil and gas companies just had a bunch of extra money they needed to burn through.

After saying all that, I think we're more likely to see $30 oil sooner than we see $100 oil again, which might not be as much good news as everyone seems to think it is (at least for places like OK). Of course, the boom did last for almost nine years, which is probably longer than most typical oil booms last.

Pat and Marcus said...

Horizontal drilling is responsible for the regional boom here as well, with lots of horizontal wells being drilled in Wyoming, Montana, and North Dakota.

Indeed, the entire fracing story that is such news elsewhere strikes me as odd as they've fraced wells for decades. That is not a new technology at all. I worked on a fracing case as long ago as around 1992 or so, and the technology wasn't new then. Perhaps new proppants or something came in (I haven't kept up with it), but the technique itself has been around for a long time.