Roughnecks Paradox

Donald Trump
Donald Trump
Donald Trump
Donald John Trump, Sr., born June 14, 1946, is an American business magnate, investor, television personality, author, and 2016 US Presidential candidate. | Donald Trump, Investor, Presidential Candidate, Money, Real Estate, Hair, Personality, Wealth, Tie, Smile,

Will increased oil production help the oilfield workers?

Hope! Change! We've heard these before. We hear these every election. Here on the ground in oil-patch Texas, the "esprit de corps" of the average oilfield worker ("roughneck") is improving with the election of Donald Trump. Many of these roughnecks fit into that non-college educated male demographic that came out in force on election day. Hope for the return of those jobs in the oilfield with previously unheard of pay for anyone willing to work without regard for the person's education or background. Change in the form of lessened regulations and environmental oversight.

President-Elect Trump backs an expansion of energy exploration activities that includes the Southeastern Outer Continental Shelf and lifting the moratoria on drilling in Alaska. Trump also supports safe-fracking, a practice currently under close scrutiny by the EPA but absolutely necessary for extraction of oil and natural gas from shale based reserves like those in the Eagle-Ford Shale play in Texas. With a Republican controlled House and Senate one would assume that these policies will be easily implemented and should receive a warm welcome by state governments in those areas affected by the same.

Bottom line, it is highly likely that oil and gas production levels will rise in the United States over the next four years.

Therein lies the paradox. Low gasoline prices are great for the general public but a glut of oil in the market hurts exploration efforts. "In 2015, the United States imported approximately 9.4 million barrels per day (MMb/d) of petroleum from about 88 countries." Simple economics dictates that an increase in the supply will lower the price per barrel of oil. Roughnecks want companies to drill, but lose their jobs if the price per barrel is too low. We are already dealing with low oil prices in the oil industry and the results are massive lay-offs, moth-balling drilling rigs, and bankruptcies. Any increase in oil production without somehow increasing the demand will not help this problem. At the end of the day, oil companies are in it for profit. Without a certain price point, additional exploration is not worth it in many areas of the country due to the large expenses associated with drilling . Here in the oil-patch, we loved the boom but the result was the bust we are now in.

Trump wants America to be "energy independent" without the need to import any oil or natural gas. Certainly, decreasing the amount of crude and natural gas we import into America is one way of increasing the demand for petrochemicals. However, it is highly unlikely that the United States could ever become truly energy independent without the need for any imports of oil or natural gas. Regardless, decreasing and then ultimately stopping oil and natural gas imports from OPEC countries is attainable, just not in the next four years.

Regardless, Trump's administration and Congress must set us down the path to at least becoming North American energy independent if only to allow oil prices to stabilize at a level that will sustain exploration efforts but also keep gas prices at a manageable level. Politics aside, thousands of Americans in the oil-field are depending on it. Oil prices stabilizing in a "Goldilocks" zone where prices are not to low but not high should help spur on further energy exploration activities and pay off for the oilfield worker.

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Updated Dec 8, 2018 9:33 AM EST | More details


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