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| Posted: 14 July 2020 at 11:02 | IP Logged
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Oil collapse: 'Right now everything I have is shut down'
The US rose over the last decade to become the world's
largest oil producer. Does the pandemic spell the
industry's decline£¿To get more news about
Wi
kiFX, you can visit wikifx news official website.
¡¡¡¡Texas oilman Allan P Bloxsom III still remembers the
taunts of ¡°college boy¡± that greeted him on the
offshore drilling rig where his father, desperate for his
wayward son to shape up, sent him to work one summer.
¡¡¡¡¡°Against my wishes I went and it changed my life,¡±
says Mr Bloxsom, now 63 years old and the president of
Fort Apache Energy, a small company that operates oil and
gas wells in Texas and Louisiana. ¡°I was hooked.¡±
¡¡¡¡That was decades ago. Since then, his home state of
Texas has more than doubled its crude oil output, helping
to turn the US into the world's biggest oil producer.
¡¡¡¡But as oil prices tumble - briefly falling below zero
in a first last month - following a dramatic drop in
energy demand because of the Covid-19 pandemic, the
industry is going into reverse.Giants such as Exxon and
Chevron and fracking firms such as Diamondback Energy
have shut in wells and slashed investment in recent
weeks, helping drive down US crude oil production by
nearly one million barrels per day from March to April -
the third largest monthly decline in a century.
¡¡¡¡Mr Bloxsom cut his typical output of 800 barrels per
day by more than half. Others have gone even further.
¡¡¡¡¡°Right now everything I have is shut down.
Everything,¡± says Bill D Graham, president of Midland,
Texas-based Incline Energy, which has 80 wells that in
more typical times would about 275 barrels per day.The
International Energy Agency expects global oil supply to
fall to a nine-year low this month, as producers around
the world reduce output in response to prices that
dropped by more than two-thirds in April before starting
to stabilise.
But even before the coronavirus pandemic hit, the
industry was experiencing a supply glut - driven by the
US boom - that had depressed prices and prompted strains
in oil-producing Texas and elsewhere. The Wall Street
money that helped power the fracking growth had grown
harder to come by, while big firms were promoting
investments in renewable energy.
¡¡¡¡Forecasters at IHS Markit say supply is unlikely to
return to 2019 levels until at least 2023. There is a
chance that 2019 will have been the high point for global
output, should the pandemic permanently reduce energy
demand - for example, by increasing telework and reducing
business travel.
¡¡¡¡¡°This is a transformational crisis for the world and
what happens to oil will be shaped by the broader forces
of change that are coming out of Covid-19,¡± says Jim
Burkhard, the firm's head of oil market research.
¡¡¡¡¡°There's enough of these variables in play where you
don't have to have a doomsday view of the world to
consider that oil demand could have peaked in 2019.
That's not our base case, but it is our alternative
scenario.¡±
¡¡¡¡'I see it going away completely'
¡¡¡¡In the US, several large US companies have already
filed for bankruptcy, with more expected in a sector
where debt levels were already dangerously high. Services
firms, desperate to survive the crisis, have cut more
than 66,000 jobs - almost 10% of total employment - with
more reductions likely, the Petroleum Equipment &
Services Association industry group estimates.As
healthier businesses scoop up the assets of distressed
rivals, the industry is likely to emerge with fewer firms
and fewer workers.
¡¡¡¡¡°The future for the small operator like me - I see
it going away completely,¡± says Mr Graham.
¡¡¡¡Mr Graham, whose father started Incline Energy in
1966, says he managed to keep his five staff after
securing government coronavirus rescue money. But if the
price his oil fetches - which for now is lower than
figure traded on financial markets - does not bounce back
above $25 by October, those jobs are at risk.
¡¡¡¡¡°With the wells shut in and zero income, we're just
going to have to play a waiting game and see how long we
can last,¡± the 66-year-old says.But Democrats, backed by
environmental groups and others concerned about fossil
fuel contributions to climate change, have resisted
greater assistance for the sector, pointing to already
high debt levels among many firms. ¡°It is deplorable to
send good money after bad,¡± Massachusetts Senator Ed
Markey, wrote after the Fed's changes.
¡¡¡¡Leslie Beyer, president of industry group Petroleum
Equipment & Services Association, says many of her
members are already working on renewables and cleaner
energy technology. She calls those who hope the pandemic
will spell the demise of the industry ¡°misguided¡±,
noting that global population growth and economic
development in poor countries will drive continuing
demand for oil.
¡¡¡¡¡°Some people who don't understand the way the
industry works ... think now is the time to transition
entirely to renewables. There is definitely room for
renewables and we need to increase those, but we don't go
zero to 60,¡± she says.
¡¡¡¡¡°It's important that we don't give up on the
ingenuity that created the shale boom. That's what put us
in the great position that we're in as the world's
largest producer ... We need to maintain that.¡±
¡¡¡¡But the best days of the industry may be over, Mr
Bloxsom says, pointing to the scarcity of young people at
conferences.
¡¡¡¡¡°I have told all four of my kids, 'Do not go into
the oil patch,¡± he says. ¡°Do something else.¡±
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Topic: Oil collapse: ’Right now everything I hav
