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Kinda OT Oil Ind. layoffs

Gary Mitchell

Gary Mitchell

Well-known Member
I have read in a place or two that in oil states like OK. or Tx. many oil related jobs are subject to layoffs due to prices of crude dropping. Maybe I'm dumb but it seems to me that if usage goes up due to lower prices, they would be making more rather than less product. Are they throwing off and waiting for prices to go back up to put people back to work? gm
 
Same thing happened in the 80s when the bottom fell out of the oil market. Cheaper to import it than drill or refine here in this country
 
Gary Mitchell- All the pumps are shut down in my area (Shale) and nobody is pumping oil. No drilling/fracking either.

The guy I leased my property to said his company may restart when oil hits $46 to $48 a barrel.
 
I am no expert, just old country boy, that being said. Oil production is neither time sentisive nor weather related oil just sits in the ground. I am referring to US producers small and large. If you had 100 wells on pump & 50 were high producers, would it not be a good time to do repairs on low producers by taking them off pump.
My 2 cnts
Led
 
State tax receipts from oil and gas operations have fallen so much in Oklahoma the state can't make school budget commitments. Lot's of people out of work, not refining or pipelines, but very little drilling, new construction, etc. Typical oil country boom/bust cycle. Lot's of producers are shutting in their production if they can afford to. They'd rather store their corn than sell it at $2.00/bushel. Oil went from $120/bbl to $30/bbl, kind of like corn going from $8 to $2.

Shale drilling/fracking often does not break even less than $45/bbl so it makes no sense to drill.
 
The oil companies are not like farmers that keep producing record surpluses with lower prices. The oil companies will quit in low price times to have oil when the prices are better. They "bank" the oil rather than sell it at a break even or loss.

I think your could have corn at $0.00 on the market and there would be tractors running full boar ahead because it just had to get better. LOL Farmers in general are good short term planners but poor long term ones. If prices go up they will produce like crazy to drive it right back down. A saying an economic professor once told me is true. "I have never seen any crop that a farmer can't produce to worthlessness" Think about it. When ever prices are good we will produce record crops and drive the price right back down.

When prices fall on cars, oil and other things the companies cut production NOT RAISE IT!!!
 
Just a few minutes ago, in China stock market trading.....

"Global benchmark Brent (LCOc1) was down 89 cents, almost over 2.6 percent, to $32.66 per barrel
at 0319 GMT (10.19 p.m. ET on Monday), and U.S. West Texas Intermediate (WTI) crude (CLc1) was
down about 2.3 percent to $32.39."
 
(quoted from post at 21:00:20 01/10/16) The oil companies are not like farmers that keep producing record surpluses with lower prices. The oil companies will quit in low price times to have oil when the prices are better. They "bank" the oil rather than sell it at a break even or loss.

I think your could have corn at $0.00 on the market and there would be tractors running full boar ahead because it just had to get better. LOL Farmers in general are good short term planners but poor long term ones. If prices go up they will produce like crazy to drive it right back down. A saying an economic professor once told me is true. "I have never seen any crop that a farmer can't produce to worthlessness" Think about it. When ever prices are good we will produce record crops and drive the price right back down.

When prices fall on cars, oil and other things the companies cut production NOT RAISE IT!!!
Click to expand...
Of course the oil companies are trying to please shareholders. They try to balance production against cost. In one sense, if you don't produce it today, you can never get that lost production back. They have to produce enough to pay for ongoing operations.

Refineries are a little different, they have to run at a loss because shutting down means even bigger losses. For an integrated oil company it's OK, losses in refining is usually made up in production. A company that only refines with no production is hung out to dry when the price of crude makes it impossible for them to make a profit. With low crude, the refiners are swimming in cash. It's a dog eat dog world, much as everyone would like to think Mr. Big is pulling the strings somewhere. Each oil company or refiner is eager to cut the other guys throat. Sometimes consumer win and sometimes they lose.
 
The reason the prices are falling is that the world economy is in shambles, and the oil investors have disappeared. In history farm commodities seem to be the first to drop and a year or two later the rest of the economy fails. Farmers quit buying equipment, vehicles, toys. everybody in production and sales become cashless, now they can't afford new stuff, ie new houses, cars, appliances etc and the dominos effect grows. This country already is in very very serious trouble, and there isnt a politician (either party) that has a clue how to fix this. And the press is so twisted it makes matters worse. The environ"mental" croud is costing the working class huge sums to "fix" the environment. Co2 concerns are ludicrous. A recent link on YT website showed Deere in debt at over a billion dollars. Yes with a B billion. The show is nearly over, too many have sought to destroy this country from within. I don't like to sound negative but I thought I would never in my lifetime see this once great nation in such serious trouble. I just saw on the news a prediction that by summer we could be seeing gasoline at $1 or less. While I enjoy low gas prices that low cost gasoline may be very expensive.
 
Economists talk about "elasticity of supply" and "elasticity of demand". When supply is elastic, supply drops as the price drops. When demand is elastic, demand increases as the price decreases. First off, demand for petroleum is not perfectly elastic; there are only so many refineries and so many vehicles on the road. Secondly, we are in a situation where the WORLD supply of petroleum is somewhat INelastic because some countries are willing to produce oil at a very low price, while many US producers are unable to compete.

The other thing to consider is that the jobs which are disappearing are related not to oil PRODUCTION but rather oil EXPLORATION. This includes not only oilfield workers and services, but also related industries such as heavy equipment manufacturing. Oil exploration is a very risky business; it makes no sense for investors to risk their money when the potential rewards are low. Why would you drill a well that MIGHT be able to produce oil for fifty bucks a barrel when oil is selling for forty bucks a barrel?

Back when gas prices were around four bucks a gallon, a few folks here insisted that all the economy needed to take off was cheap gas. Guess they were wrong.
 
Larry

Try this and the link

http://www.smalldeadanimals.com/2016/01/red-ink-country-3.html

And I'm dreading what might roll over the horizon in Oz too.
 
Andy

May not be typical.

I have a contact that has been in the industry a long time. His comment is that he's seen the industry up and down, but has never seen it down when everything else is down as well.
 
To me this is the big problem of having an economy that is based so heavily on consumer spending for stuff that isn't really needed anyway. Just look around at the explosion of storage units in the past two decades - we have so much stuff that our houses and garages can't contain it anymore and we're forced to store it off site. But, when consumers slow down on their spending for overpriced and unnecessary stuff (designer clothes, luxury vehicles, high-tech appliances, electronic gadgets, etc, etc) there are fears that the economy is collapsing. In my thinking an economy like this isn't sustainable over the long run but everything is based on it always being there.
 
Another factor is the recent legislation permitting the export of our crude oil. I am no economist, but I liken this law to the old adage that you never should export raw materials, only the finished product!! Years ago when we were still cutting old growth timber in the PNW, Japan was buying logs, taking them offshore to a floating sawmill, and then selling lumber back to us, making ghost towns out of several logging and milling communities. How did that work out for us? We blamed the spotted owl, instead of the get rich quick investors.
 
(quoted from post at 07:29:37 01/11/16)

Back when gas prices were around four bucks a gallon, a few folks here insisted that all the economy needed to take off was cheap gas. Guess they were wrong.
Click to expand...

You know it's more complex than that. The average Joe isn't hurting because oil/gas/diesel/heating fuel prices are low right now. Where that will bounce back and hurt him is in the sales and excise taxes that are correspondingly low since the gov't cannot do without, so taxes will be raised to cover the lost tax revenue. when fuel costs go back up, and they will, the taxes will not be cut back to previous levels, so it will be another double whammy.

If you had low fuel prices and a reason for the economy to grow, low fuel prices would help. There is nothing to grow the US economy at this point.
 
As Mark B said in his post the exploration jobs are the first to get cut - then its the drilling jobs. Once a well is up and running they don't require much labor or mechanical input. Putting a well in the ground requires a crew, lots of pipe and heavy machinery. When oil drops to $40 a barrel (or less) no one is interested in drilling new wells, that labor is gone, then the heavy machinery and pipe supplier take their hits. Without all that activity the local economy takes a hit and eventually the state does too.
 
That along with cutting back on our military strength seem to me to be two of the stupidest things our country is doing these days....I don't know who all is really to blame for these decisions, but whoever it is isn't interested in the future wellbeing of our country IMHO. I would guarentee we will live to regret both these actions.
 
The way things are heating up in the Straits of Hormuze (sp), I doubt that the price of crude oil will stay low very long. Stay tuned!!
 
(quoted from post at 20:30:27 01/10/16) I have read in a place or two that in oil states like OK. or Tx. many oil related jobs are subject to layoffs due to prices of crude dropping. Maybe I'm dumb but it seems to me that if usage goes up due to lower prices, they would be making more rather than less product. Are they throwing off and waiting for prices to go back up to put people back to work? gm
Click to expand...

No different than the auto industry. The old saying was " when the rest of the country catches cold, Michigan catches pneumonia".
Boom and bust cycles are common to many industries. That's why they are called cyclical. I think Michigan may have become somewhat immune to the cycle - most of the jobs have left, and they aren't coming back.
 
> Years ago when we were still cutting old growth timber in the PNW, Japan was buying logs, taking them offshore to a floating sawmill, and then selling lumber back to us, making ghost towns out of several logging and milling communities. How did that work out for us? We blamed the spotted owl, instead of the get rich quick investors.

I had not heard of the floating sawmills, but it seems likely. However, I doubt that any of that lumber made its way back to the US market, since it was far more valuable in Japan. The Japanese know the value of old-growth Douglas Fir; they weren't about to let their precious logs go through an American sawmill, for the same reason you wouldn't send a rare Bugatti to Earl Scheib for a paint job. Meanwhile, the spotted owl was a convenient scapegoat for mill operators who were unwilling or unable to meet the exacting demands of Japanese customers.
 
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