HEAVY IRON NEWS
The Next Oil Boom Will Be Even Louder
Design Team • February 2, 2016
The last oil boom saved the economy, but the next oil boom could be even louder. Analysts believe that another oil boom may be swiftly approaching, as the demand for oil has been increasing on a global scale. Though the domestic oil and gas industry may have been struggling, oil sales themselves remain stronger than ever, and many domestic oil producers have continued to either maintain or even ramp up production.
GLOBAL USE SET TO RISE BY 1.3 MILLION BARRELS A DAY
Analysts project that the global use of oil will rise by 1.3 million barrels per day, and that's taking into effect the current slowdown in China's economy. In a supply-and-demand economy, the more oil that is requested, the more the per barrel costs will rise. North American companies have become more efficient in recovering oil and can thus make more of a profit per barrel, so the next oil boom will be even more significant to the industry; every dollar that the barrel gains now is pure profit, because the costs of producing those barrels have been stripped down to nearly nothing. Advanced fracking techniques have already entered into common usage to recover as much oil as possible with as little cost as needed.
AN UNSUSTAINABLE SURPLUS OF CHEAP OIL
An increase in oil might not mean much if the current costs of oil weren't already artificially depressed on a global scale. The lowered per barrel costs of oil are currently due to an agreement by OPEC to flood the market with cheap oil. This was an attempt to drive North American shale oil companies out of the industry. But though the OPEC nations may have quite a surplus of oil, they don't have enough to maintain these cheap costs indefinitely. As the global usage of oil continues to rise, OPEC will also need to increase their prices. And as OPEC reduces its supply and increases its prices, the North American shale oil companies will have an advantage; they have been operating with lean overhead and innovative new techniques for years in order to maximize their profits.
THE IMPROVED PROFITABILITY OF AMERICAN OIL
In attempting to drive America out of the oil industry, OPEC actually succeeded in making the American oil industry hardier. Analysts now believe that oil and gas companies will be able to profit on oil as long as it remains above $40 a barrel, and most analysts believe that the per barrel costs will be well over that figure by the end of 2016. For many countries, oil production simply cannot be done as efficiently and cheaply. Most non-OPEC countries will need a per barrel price of at least $80 or more before they can begin to profit within the global market, and this price may not be seen for the foreseeable future. As it stands now, a price increase to $50 or $60 would radically shift the domestic oil and gas market.
Oil and gas companies are likely to see an incredible resurgence in profitability throughout 2016, as most analysts do believe that the next big boom is coming. With reduced overhead and increased profits, oil and gas companies will find that even minor increases in price will dramatically increase their revenue. In turn, the American economy will see additional jobs and improved oil and gas supply. For more information about the oil and gas industry, contact Heavy Iron Oilfield Services, LP today.
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