Shale rigs idle, layoffs rise as $60 oil tests resilience of Permian

[BumRushDaShow]

Source: msn/Reuters

12h


MIDLAND, TEXAS, Nov 21 (Reuters) - At the heart of the U.S. shale industry in Texas, oil production is climbing. But you wouldn't know that if you talked to Mark Waters, who owns a store that sells tools and safety equipment to oil firms.

His small business, Tie Specialties, in Odessa, Texas, saw a 25% drop in oilfield sales over the last four to six months. Shelves are stacked with hand tools like wrenches, augers for digging holes, shovels, and other power tools. Peg boards show off hard hats, gloves, and various colored overalls. "This is my sixth boom-bust. So I've been around it. I'd call it a slowdown, but everybody that I've talked to says the future is not very bright for the next couple of years," said Waters, 65.

U.S. oil output has yet to register the full impact of the downturn. Waters and others who make their living around the oilfield are finding it more difficult to turn a profit as crude hovers around $60 a barrel, signaling bigger economic woes are on the way, Reuters interviews with 10 producers, service companies and residents around the Permian Basin show.

The largest U.S. oilfield has weathered previous downturns, but President Donald Trump's policies have added to the slide in per-barrel profitability of U.S. producers, already stifled by rising output from producer group Organization of the Petroleum Exporting Countries and its allies, as well as the biggest wave of consolidation in a generation.

Read more: https://www.msn.com/en-ca/money/topstories/shale-rigs-idle-layoffs-rise-as-60-oil-tests-resilience-of-permian/ar-AA1QT3LI

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As some may have seen me post - the current "glut" (with more to come from OPEC/OPEC+) is killing the shale folks because the current price per/bbl is right around the average "breakeven" if they had to drill any new wells.

[moniss]

1. Amazingly though we still have people

claiming all is rosy in the oil patch. Some people will just kiss the backside of this government while it claims things are fine all the while they have ever increasing prices eating into a non-increasing household income. But they likely own several red hats and are planning on buying some more branded trash.

[AZJonnie]

2. There's another key component to this that's quite separate from the public's take-home pay you mention

To whit: when the oil industry's "minimum dollars per barrel prices to justify creating new wells" go up (as I believe these numbers have done), this is a symptom of permanent depletion. Producers first go after the available reserves that are the cheapest (in many ways this means "the least energy-intensive" ) to extract. The less they spend to extract, the more profit, obviously.

So when these particular values they're quoting here go up (and again, I think they have vs numbers I've seen not that long ago), it's because the producers are running out of cheap, easy to extract product. This mean Energy Returned (hydrocarbons) is shrinking in relation to Energy Invested (fuel and other resources burned up just to get the hydrocarbons out of the ground).

In turn, lower EROEI in the oil patches means humanity has less available energy to do the things they like to do, like making money, eating, having homes built, and pretty much nearly everything any one of us does with our days and what products are available to buy at what price. It essentially means our LIVES get more expensive.

Make no mistake, without the MASSIVE availability of high EROEI hydrocarbons, our 8B global population is completely unsustainable. These numbers going up is a bad sign, completely in and of themselves, regardless of the population's shrinking household incomes, higher prices, inflation, etc. In fact, these numbers going up? They cause all those problems, yes, but often not through greed, but rather through physics.

[moniss]

5. Indeed but I was referring to just the

average consumer. The greed I mention was about the economy as a whole with each aspect feeling they can just force a higher and higher percentage of the available household funds to come their way. Sooner or later it breaks if people don't modify their situation. In the case where the ability to modify or have choices is limited we see things get drastic even quicker.

As I said unfortunately we see the die hard believers in the idea of "drill baby drill" and their red hats forming the political base that adamantly prevents strategies that would extend the supply of oil such as alternative energy, conservation and mileage standards.
All while they wear their red hats and act like this can go on forever just because a crooked con man tells them it will.

My personal feeling, which I've posted before, is that we missed our opportunity some time ago to make major change regarding energy and climate change matters. I pointed out that even in the best of cases it takes many years to fight through the pig-headed resistance and then many more years for implementations at a scale large enough to have moderating effects of significant size.

When Jimmy Carter, rightly so, tried to get the world to come around to the magnitude of the problem and need for major change he was met with what is always the biggest problem in solving anything. Resistance of human beings and the ability for propaganda against the change to forestall or kill changes until we end up in a deeper and deeper approach to a crisis point.

OPEC+, as pointed out, is bringing even more production on line and the expenses of shale extraction aren't getting any less. As you point out the easier, less expensive to obtain oil is gone and now we are going into a "hangover" period where we bragged about our "oil independence" but knowledgeable people always knew it was short lived. But nobody wanted to listen to us. We were party- poopers and the idea that the "free booze" would run out and that there would be a bill for the band and the hall at the end of the night was something the people in power and the greed merchants didn't want people to think about. Party on and raise the speed limits and drive big pickup trucks to the grocery store to get 10 pounds of groceries. That was the story pushed on their screens and to their ears. Don't just have a hamburger. Have one that is 3 patties high with a half a pound of cheese, half a pound of bacon and a bun the size of a hub cap.

When Professor Newtol Press told us in a class that advertising, propaganda and media was destroying society some of us understood but many thought he was just a crazy anthropologist. Dr. Press was right. As you point out by and large the people in developed societies have surrendered to consumption and lifestyle expectations that demand and depend upon hydrocarbon energy and we have squandered the warnings of the last more than 60 years and the words of people like Press and others who clearly saw where we were going, what was driving it to unsustainable levels and the impact of waiting until times of deep crisis in order to try to change.

[Red Mountain]

3. Follow the flashing light

to the Trump (family) Saudi bromance.

We have reserves, yes....but they have the reserves that are cheap to extract.....which is to say.......profitable NOW.

[BumRushDaShow]

4. "profitable NOW."

Well they got in an oil production war with Russia back in 2020 and this happened -



(i.e., rather than having someone buy for $x/bbl, they had to PAY for someone to store it)