Sunday, February 21, 2016

When thigs are going well for most of us there is always a group that is suffering and these days it is anyone in the oil business that is suffering.  Most of America is thrilled that gas prices are under $2 dollars a gallon and in some areas, $1.50 per gallon. Last year falling gas prices put an extra $150 Billion dollars in American’s pockets.  The price of oil has dipped below $30 per barrel. It should be all ok and one big boost to the economy but in Midland, Texas they call it the crash. It is a   deep economic disaster for them.Oil fields are closing up and oil rigs and drilling equipment stand idle filling up used car lots.  America’s oil and gas industry is going through a deep economic depression   with a few hundred million     dollars’ worth of drilling rigs going idle in West Texas.
It is the flip side of low oil prices and I don’t care. I want to enjoy this side for a change. The United States oil industry is down 60 per cent in production. Auction lots are filled with trucks and heavy equipment being sold for quick cash. People have lost their jobs since a gallon of water cost more than a gallon   of gas. World -wide the industry has cut more than 275,000 jobs.  In mid-2014   the price of a barrel peaked at $112.00 per barrel. The price fell because OPEC has not cut production. The author Daniel Yergin describes such a change much better in his book called The Prize. The epic quest for Oil, Money and Power.
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Saudi Arabia’s plan is to maintain a market share in the global oil production market. Russia too is pumping gas and oil at full blast. The United States is still fracking which is pumping water into shale formations to free hard to get at oil and gas. Well, fracking meant that suddenly the United States was producing a lot more oil, so much that for the first time in 40 years we are finally exporting the stuff. In 2008 the United States went from producing 500 million barrels per day to now being able to produce 900 barrels per day. In just a matter of a few years, United States production has doubled. In the past few years places in Texas were full of oil equipment and so many workers that they lived on cots in trailers.
Then the price crashed due to China’s slowing economy. The Saudi’s and Russians kept pumping because they don’t pay their workers much to work. If Iran starts pumping again even the Saudi’s and Russians will fail. The world is producing more than a million and a half barrels of oil than it needs. The oil is being stored in huge tanks around the world and are sitting in tankers parked at sea.  When is the United Nations going to get involved in this issue to stabilize production and prices world-wide? Even if the price does go up it will take time to use the surplus dangerously hanging around in our waters and lands.

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