{"id":38989,"date":"2014-10-22T14:01:30","date_gmt":"2014-10-22T19:01:30","guid":{"rendered":"http:\/\/stateimpact.npr.org\/texas\/?p=38989"},"modified":"2014-10-22T14:01:30","modified_gmt":"2014-10-22T19:01:30","slug":"does-drop-in-oil-prices-make-texas-crude-too-expensive","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/texas\/2014\/10\/22\/does-drop-in-oil-prices-make-texas-crude-too-expensive\/","title":{"rendered":"Does Drop In Oil Prices Make Texas Crude Too Expensive?"},"content":{"rendered":"<div>\n<div id=\"attachment_30357\"  class=\"wp-caption module image right\" style=\"max-width: 300px;\"><img decoding=\"async\" loading=\"lazy\" class=\"size-medium wp-image-30357\" alt=\"A Permian Basin oil rig.\" src=\"http:\/\/stateimpact.npr.org\/texas\/files\/2013\/08\/rig-300x225.jpg\" width=\"300\" height=\"225\" srcset=\"https:\/\/stateimpact.npr.org\/texas\/files\/2013\/08\/rig-300x225.jpg 300w, https:\/\/stateimpact.npr.org\/texas\/files\/2013\/08\/rig-620x465.jpg 620w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><p class=\"wp-media-credit\">Photo by Mose Buchele<\/p><p class=\"wp-caption-text\">A Permian Basin oil rig.<\/p><\/div>\n<p>Recent financial news headlines have warned about:<\/p>\n<ul>\n<li>The dangers of \u201cfalling oil.\u201d<\/li>\n<li>Or enduring the \u201cOil Crash of 2014.\u201d<\/li>\n<li>Or having oil producers headed for \u201coblivion.\u201d<\/li>\n<\/ul>\n<p>Could it really get that bad? Maybe, if it\u2019s like it was a few decades ago.<\/p>\n<p>\u201cThere were bankruptcies everywhere,&#8221; said\u00a0<a href=\"https:\/\/www.hillhouseresources.com\/ed-hirs.html\" target=\"_blank\">Ed Hirs, a Houston\u00a0oil man and energy economist<\/a>. &#8220;Exxon laid off 50,000 employees in 1986.&#8221;<\/p>\n<p><iframe loading=\"lazy\" width=\"100%\" height=\"166\" scrolling=\"no\" frameborder=\"no\" src=\"https:\/\/w.soundcloud.com\/player\/?url=https%3A\/\/api.soundcloud.com\/tracks\/173201328&amp;color=ff5500&amp;auto_play=false&amp;hide_related=false&amp;show_comments=true&amp;show_user=true&amp;show_reposts=false\"><\/iframe><\/p>\n<p>But to mimic the great oil bust of the 1980\u2019s, prices today have a long, long way to drop.<!--more--><\/p>\n<p>What may be helpful to understand now about the price of oil is how much it costs to drill for it. Naturally, the cheapest drillers will do best.<\/p>\n<p>\u201cThe losers are the most expensive producers of crude oil. Right now, that\u2019s the United States,\u201d Hirs said.<\/p>\n<p>It\u2019s expensive to drill for oil in the United States because of hydraulic fracturing, or fracking. It\u2019s how a majority of new wells are drilled in Texas and other states. The amount of oil that is now produced in the U.S. makes it the world\u2019s top oil producer, even ahead of Saudi Arabia.<\/p>\n<p>But while fracking has revolutionized the industry and has led to lots of new jobs, it\u2019s costly.<\/p>\n<p>It requires drilling companies to spend millions of dollars per well to truck in water, chemicals, and sand. The mixture is injected deep into underground rock formations to break them up in order to release the oil. As long as oil sells like it has been \u2014 at upwards of $100 a barrel \u2014 there is no problem.<\/p>\n<p>But lately, it\u2019s at about $80 a barrel.<\/p>\n<p>\u201cSuddenly they\u2019re competing against some very low cost producers. The Saudis can produce oil at $25 a barrel,\u201d Hirs said.<\/p>\n<p>So that prompts the critical question: what exactly does oil have to sell for\u00a0<a href=\"http:\/\/houstonpublicmedia.org\/news\/falling-oil-prices-put-squeeze-on-houston-companies\/\" target=\"_blank\">to keep Texas drillers in business<\/a>?<\/p>\n<p>\u201cFor the high cost operators, these prices may be a problem,&#8221; said Greg Haas, director of research at\u00a0<a href=\"http:\/\/www.globalbiofuelscenter.com\/HomePageNewsPressEventDetails.aspx\" target=\"_blank\">Stratas Advisors<\/a>.\u00a0&#8220;But for the vast majority of the wells we\u2019ve analyzed the economics for, it looks like these prices are not a problem.\u201d<\/p>\n<p>In fact, Haas says they found that some drillers in South and West Texas could break-even with oil as low as $27 to $31 a barrel. But the majority would need prices to remain between $40 to $50 a barrel.<\/p>\n<p>That\u2019s in the ballpark of what\u00a0<a href=\"http:\/\/www.cnbc.com\/id\/102094881\" target=\"_blank\">Citigroup bank found in a report<\/a>\u00a0it recently did. Which is not to say there won\u2019t be some drillers who face tough times.<\/p>\n<p>Haas estimates that some Texas drillers have break-even prices in the $70 to $100 range. For those drillers, if oil prices drop below $80, it could be trouble. But it does not necessarily mean oblivion for the industry.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Recent financial news headlines have warned about: The dangers of \u201cfalling oil.\u201d Or enduring the \u201cOil Crash of 2014.\u201d Or having oil producers headed for \u201coblivion.\u201d Could it really get that bad? Maybe, if it\u2019s like it was a few decades ago. \u201cThere were bankruptcies everywhere,&#8221; said\u00a0Ed Hirs, a Houston\u00a0oil man and energy economist. &#8220;Exxon [&hellip;]<\/p>\n","protected":false},"author":53,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[59],"tags":[15],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/38989"}],"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\/53"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/comments?post=38989"}],"version-history":[{"count":3,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/38989\/revisions"}],"predecessor-version":[{"id":38992,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/38989\/revisions\/38992"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/media?parent=38989"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/categories?post=38989"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/tags?post=38989"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}