According to a December 16, 2014, report by MarketWatch, “a couple of weeks ago, Wall Street was cheering the dramatic drop in prices of crude oil and gasoline. Now, traders….are worried that oil prices have gone too low.” On a consumer level, most people appreciated the lower cost of gas. Some felt that “it amounted to a rather sizable boost in buying power….a 4 percent salary raise that was not obtainable from people’s jobs.”
The New York Times Editorial Board chimed in by saying, “…. lower prices could slow production of shale oil, which is expensive and needs higher prices to be profitable. Shale oil production and the fracking industries need oil to sell at an average of $60 a barrel to break even. For small companies, that price is much higher.”
However, not everyone shares that opinion. An article in the Wall Street Journal said that “Oil prices would need to fall at least another $20 a barrel to choke off the U.S. energy boom.”
Shale Directories tells MHProNews that “99 permits were issued in PA between December 1 and December 11. It’s 15 E&P Companies in 14 counties. It does not appear that falling oil prices are affecting Nat Gas drilling. OH had 19 permits last week which is busy week. American Energy Utica is ramping for heavy drilling in January.”
Yet another positive opinion was voiced by Cyrus Sanati, in Fortune, who said, “Fracking last boomed in the U.S. back in the mid-1980s, when a barrel of oil fetched around $23. That is equivalent to around $50 a barrel today, when adjusted for inflation. That fracking boom went bust after prices fell to around $8 a barrel, which is worth around $18 in today’s money. With oil last week hitting $63 a barrel, it seems that prices have a lot more room to fall before things get really scary.”
Although Wall Street seems nervous – and drilling permits vary from state to state – it appears that production is being maintained at an profitable level.
The bottom line is that oil producers are seemingly forging ahead, in spite of the pressure from OPEC.
MHProNews contacted a retailer in San Antonio, not far from the Eagle Ford Shale area, who said they had not experienced any decline in sales. Other retailers near boom areas have – so far – shared similar reports. ##
Related story on consumers, dropping oil prices and MH at this link.
(Photo credit: Reuters)
