The Oil Boom is Busting

Monday, January 26, 2015

As oil prices plummet- 60% lower than the ½-year ago figure- drilling budgets across Texas are vanishing. And usually quick drastic turnarounds such as this tend to resonate over an extended period of time. This is exactly why experts are projecting a prolonged impact from the dropping prices

Crude prices haven’t fallen so quickly since 1986, after having tripled its output over the past five years. This Texas oil boom was due in great part to hydraulic fracturing and shale drilling (fracking). This eventually contributed to increased supply on dwindling demand thanks to more efficient cars and consumer consciousness.

These factors are contributing to a projected drop in production as frackers are expected to cut drilling budgets anywhere from 20-35% before 2016. And with these budget cuts, a large percentage of the 300,000 Texas oil workers will be put out of work in the coming months.

From near $100 a barrel of oil 6 months ago all the way down to $46, where the price sits now, the skid has no end in sight. Analysts have given up saying when the bottom will come, but the bold ones are projecting $30/barrel by summertime. The truth is no one knows when the bottom will drop out. But because the economy is much more diversified than ever before, there is no expectation of a repeat to the 1986 oil bust.