Oil Industry Adjusts to Lower Prices

By Farrell, Michael B | The Christian Science Monitor, December 5, 2008 | Go to article overview

Oil Industry Adjusts to Lower Prices


Farrell, Michael B, The Christian Science Monitor


Oil's swan dive from a record high of $147 a barrel last summer to a trading price of $46.10 Thursday, the lowest level in nearly four years, has rattled America's energy industry. But it hasn't flattened it - so far.

What the price drop does mean is that some oil-patch wildcatters have packed up their drill bits as the rush for new domestic exploration has cooled since summer.

"Six months ago everything was roses, and nobody in this business had any inkling that oil prices would decline virtually $100 a barrel," says Alex Mills, president of the Texas Alliance of Energy Producers. Now, he says, "some people have already pulled back on their drilling programs."

No doubt, profits for Big Oil will tumble from this year's record highs. And because of the tightening credit market, many producers - majors and independents - will shut down drilling rigs and trim production in the year ahead.

Fifty-seven percent of the chief financial officers at US oil and gas companies said it's "credit capacity restraints" that will be their most significant challenge in 2009, according to a survey released Tuesday by the accounting firm BDO Seidman.

The oil executives' No. 2 concern is falling prices. While some oil traders are speculating that crude could sink to $30 a barrel in the first quarter of 2009, the outlook from the Energy Information Administration (EIA) has average prices for next year at $63.50.

Sixty-dollar-a-barrel oil is a strong price for the industry, say energy experts and insiders - still higher than 2005 prices.

"The oil industry never imagined that prices would go to $147," says Amy Myers Jaffe, an energy expert at Rice University in Houston. "Obviously, some things have changed if you are a consumer and you are going to the pump, but really, from the industry's point of view, nothing has changed."

For the majors - who have very deep pockets and long-term outlooks - this might be the case. Chevron, which posted $7.89 billion in earnings in the third quarter this year, says its capital program - money intended for finding and developing new sources of energy - will probably remain at a 2008 level of $22.9 billion next year.

"We have experienced a number of years of strong earnings and cash flow that have enabled us to invest in high-quality projects that are either now on line or will start up in the coming year," said Chevron spokesman Kurt Glaubitz in an e-mail response to questions. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Oil Industry Adjusts to Lower Prices
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.