US oil boom: Can the industry survive falling prices?

US oil boom: Can the industry survive falling prices?

Oil production is everywhere in Carter County, Oklahoma.

On the surface, the area is mostly empty, populated by lazily grazing cattle, with a few silos here and there.

But underneath the ground, it is a congested highway, where dozens of oil and gas firms are busy drilling horizontal wells.

“Everybody is running as fast as they can, trying to drill and take advantage of those high prices,” says John Gibbs, the owner of TriPower Resources, a small oil and gas firm who has been operating in the area for over two decades.

And that has led to a boom in nearby Ardmore – the biggest town for miles, which owes much of its existence to oil, which was first discovered nearby in 1913.

Here, that underground congestion has finally broken above ground.

“We used to laugh – I came up from Houston and talking about traffic in Ardmore was a joke,” says Mr Gibbs.

“Now, there’s traffic in the mornings and evenings and the hotels are full.”
A global glut?

Nationwide, from North Dakota to Texas, technological improvements in horizontal drilling, or fracking, have led to an oil boom across the country, pushing US oil production to a 31-year high.

In Oklahoma, the discovery of oil resources contained within the Woodford-Cana shale has led some to speculate that the state could once again become the nation’s leading oil producer, a position it last held at the turn of the 20th century.

But all of this production is dependent on high prices, which have been plummeting over the summer.

The price per barrel of the benchmark Brent Crude index recently hit a four-year low, and that has some wondering about the economics of continued production if there is in fact a global supply war.

However, Fadel Gheit, a senior analyst covering oil at Oppenheimer and Company, says that prices would have to fall significantly to really force any producer in the US out of business.

Read More:BBC News – US oil boom: Can the industry survive falling prices?.

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