HEAVY IRON NEWS
Oil Production Is Still Increasing
Design Team • November 24, 2015
Though oil prices have been steadily dropping, oil production is still increasing. Oil is still a valuable commodity throughout the globe, and there will always be a demand for oil. The domestic oil industry, for the most part, has chosen to increase oil production rather than slow it down or even maintain it. This decision has been made for a variety of important reasons that deal directly with the global supply and the domestic market.
INCREASED EFFICIENCY DRIVEN BY DECREASING PRICES
Oil and gas companies have been steadily developing more efficient, more productive methods of oil and gas recovery. The advent of widespread hydraulic fracturing vastly increased the amounts of oil that could be claimed from each well site, in addition to making the process faster easier, and safer. As prices have decreased, oil and gas companies have been able to fine-tune oil and gas production methods. Companies today are now able to produce far more oil and gas than they have in the past, and this is providing an additional oil surplus. Recently, options such as refracking have also become feasible, which will, in turn, produce even more oil and gas.
KEEPING THE MARKET STRONG IN FACE OF ADVERSITY
When faced by lowered gas prices, oil and gas companies can either increase their production (and therefore, their revenue, even though per barrel prices may be decreasing), or layoff their employees and limit their operations. By downsizing, oil and gas companies would put themselves in a vulnerable situation during a market rebound. Additionally, oil and gas companies would weaken their communities through layoffs and slowed production. Though it might be more financially feasible to downsize, oil companies have an interest in their employees and the communities that they have invested in.
BUILDING A FOUNDATION AND WEATHERING THE STORM
A significant contributing factor to lowered oil costs is a surplus of foreign oil that has been designed to drive domestic oil producers out of the market. By yielding to this, oil and gas companies would simply leave the country's oil supply in the hands of foreign providers. Lowered gas prices cannot last forever; they are being artificially dampened for political reasons. Once oil and gas prices again rise, the hope is that there will be a firm foundation for domestic oil producers to build upon. Should oil and gas companies downsize, they would only find themselves at a disadvantage when competing with foreign oil later on; by improving upon technology now, they remain competitive and may even be able to set the price of the market on their own.
Increased oil production and decreased oil prices will ultimately be good for the domestic economy. As gas prices fall, the economy strengthens. The oil industry will continue to work at improving the efficiency and productivity of their oil operations, and ultimately the oil industry may be able to increase their profit margins without increasing costs. Better technology and fewer unnecessary regulations will pave the way to an easier, cleaner, and cheaper energy future.
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