TEXAS OIL BOOM SLOWING?- It’s been a roller-coaster ride regarding the stock market and energy commodities so far this week. And if you’ve been paying attention to the price of oil and natural gas, you may wonder just how well those industries are doing. In recent months analysts have reported that domestic oil production has been so good that the U.S. has been producing more barrels of oil than it’s importing. For example look at the Lone Star State -- The oil boom centered in the Permian Basin of West Texas has reconfigured international markets, reshaped geopolitics and turned the US into the biggest oil producer in the world but growth in US production was underwritten by speculation. Investors looking for better returns than they could get in a low interest rate environment - put a lot of money into oil companies, so a lot of drilling took place pumping tons of oil from the ground, but analysts say this has yet to deliver the profits investors were expecting. Art Burman is a Houston-based geologist and energy consultant, he told Texas Public Radio in
Austin that common perceptions about the oil industry aren’t always accurate.
“People say they must be making money, because look at all the oil they’re producing," Burman explained. "I mean these are smart companies they wouldn’t be doing this if they weren’t making money. That’s a really bad assumption to make.”
Now oil companies in west Texas are slashing growth expectations, production targets and laying off employees as anxiety increases that the U.S. oil boom was based on highly speculative financial assumptions.
Burman adds “..there’s been almost an infinite amount of capital going into this stuff. And frankly a lot of people just got kind of intoxicated by it.”
Burman recently calculated that some Permian Basin companies are losing -- on average -- about five dollars per barrel of oil they extract. He expects fear over long-term profitability will cause more investors pull out and oil production to slow.
