{"id":33278,"date":"2013-12-13T11:29:01","date_gmt":"2013-12-13T17:29:01","guid":{"rendered":"http:\/\/stateimpact.npr.org\/texas\/?p=33278"},"modified":"2013-12-24T15:00:23","modified_gmt":"2013-12-24T21:00:23","slug":"analysts-divided-on-oil-price-in-2014-effect-on-permian-basin-boom","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/texas\/2013\/12\/13\/analysts-divided-on-oil-price-in-2014-effect-on-permian-basin-boom\/","title":{"rendered":"Analysts Divided On Oil Price In 2014: Effect On Permian Basin Boom"},"content":{"rendered":"
\"An<\/a>

Courtesy of KXWT<\/p>

An oil rig south of Pyote, Texas, December 11, 2013.<\/p><\/div>\n

This story was produced by member station KXWT.<\/em><\/p>\n

The energy boom in the\u00a0Permian Basin\u00a0<\/a>of Texas and New Mexico is driving one of the nation\u2019s fastest growing regional economies.<\/p>\n

But growth is tied to the price of oil and some prominent energy analysts suggest the\u00a0price of crude<\/a>\u00a0will fall in 2014.<\/p>\n

<\/em>Oil wells operating round the clock represent the sound of a region transformed.<\/p>\n

\n

Modern technologies like fracking and horizontal drilling are cutting the cost of extracting oil and gas from what was once the floor of an\u00a0ancient sea<\/a>\u00a0laced with hydrocarbons.Bob Randolph is an oil field supervisor working as a consultant with Arabella Petroleum. He runs crews drilling through the Permian\u2019s porous shale. 140-foot tall rigs back up against each other on to the dusty horizon.<\/p>\n

\u201cThings are real good,\u201d he said while scurrying around the base of one of the rigs.<\/p>\n<\/div>\n

\n

\u201cThe drilling industry is doin\u2019 good. Price of oil\u2019s hanging in. Need the price of natural gas to come up a little bit but the oil field\u2019s doin\u2019 real good right now.\u201dIn Texas they say everything\u2019s bigger. Never more true than in the Permian Basin today. Private jets compete for parking space. Rents are on a par with San Francisco. Streets are full of luxury cars, all symbols of wealth all pegged to oil and gas prices.<\/p>\n

The price of\u00a0West Texas Intermediate<\/a>\u00a0crude (WTI) is the nation\u2019s benchmark for oil.
\nRight now it\u2019s around 98 dollars a barrel. That\u2019s a healthy price for continued industry growth.<\/p>\n

But one of the industry\u2019s most followed analysts says the price of crude is set for a drop.<\/p>\n<\/div>\n

Fadel Gheit<\/a>\u00a0at Oppenheimer in New York sent a\u00a0note\u00a0<\/a>to clients predicting prices will fall in 2014.<\/p>\n

\u201cWe think oil prices inflated by as much as 20 to 30 per cent,\u201d\u00a0<\/i>he told Marfa Public Radio and West Texas Public Radio in the Permian Basin.
\n<\/i>
\nGheit says in the big picture, the Permian\u2019s economy will withstand any downward pressure. But he suggests jobs might be lost as big players swallow junior operators.<\/p>\n

url=https%3A\/\/api.soundcloud.com\/tracks\/126207270&color=ff6600&auto_play=false&show_artwork=true”><\/iframe>
\nBig players such as\u00a0Exxon Mobil<\/a>\u00a0and\u00a0Chevron\u00a0<\/a>are established here.<\/p>\n

He says the supply vs demand equation does not look good entering the new year. He says there\u2019s plenty of oil stockpiled domestically.<\/p>\n

And he suggests the market has priced in the possibility of an interruption of supply from Iran that he suggests will evaporate once Iran and the international community settle the future\u00a0Iran\u2019s nuclear ambitions.<\/a><\/p>\n

\n

\u201cI think we are in a bubble and bubbles always burst, the question is not if,\u201d he said. \u201cIt\u2019s when.\u201dOil and gas investor investor\u00a0Bill Dingus of Midland, Texas\u00a0<\/a>says even if oil prices drop, modern technology will continue to cut the cost of extraction. That means the energy play here is sustainable.<\/p>\n

\u201cThe difference between today and 20 years ago is, used to, you drilled a hole in the ground and you hope you find oil. Now we know we\u2019ll find oil,\u201d he said emphatically.
\n<\/i>
\nDingus says industry consolidation that Gheit is predicting has already started.
\n
\n<\/em>\u201cAnd the reason is because this is a big boy game,\u201dhe says.<\/p>\n<\/div>\n

\n

\u201cIt\u2019s expensive drilling. And if the prices does drop the margins get smaller and it squeezes out the people who can\u2019t live on a 12 per cent rate of return.\u201dThat\u2019s considered a modest return these days in the Permian Basin.<\/p>\n<\/div>\n

Benjamin Shattuck with\u00a0Wood Mackenzie<\/a>\u00a0in Houston says crude won\u2019t plummet. He concedes it may fall a little bit and but says Permian Basin companies with deep pockets will thrive.\u201cEverything we\u2019ve seen is that these are pretty promising plays going forward,\u201d he says referring to the Permian Basin.<\/p>\n

\u201cCertainly a lot of work to be done and there is uncertainty there. But for the best operators you\u2019re looking at a very bright picture going forward.\u201d
\n<\/i>
\nSome\u00a0workers<\/a>\u00a0in the oilfields of Texas and New Mexico are concerned that lower priced crude may threaten their jobs. But many investors hope the oil market cools.<\/p>\n

They are looking for a buying opportunity to get into the Permian basin boom.<\/p>\n","protected":false},"excerpt":{"rendered":"

This story was produced by member station KXWT. The energy boom in the\u00a0Permian Basin\u00a0of Texas and New Mexico is driving one of the nation\u2019s fastest growing regional economies. But growth is tied to the price of oil and some prominent energy analysts suggest the\u00a0price of crude\u00a0will fall in 2014. Oil wells operating round the clock […]<\/p>\n","protected":false},"author":51,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[59],"tags":[21,105],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/33278"}],"collection":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/users\/51"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/comments?post=33278"}],"version-history":[{"count":6,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/33278\/revisions"}],"predecessor-version":[{"id":33283,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/33278\/revisions\/33283"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/media?parent=33278"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/categories?post=33278"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/tags?post=33278"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}