US Costs For Oil To SkyRocket

[Economy 52,861]

http://www.nola.com/business/index.ssf/2015/12/plunging_oil_prices_shake_up_g.html

 

Some experts are warning that the US shale industry is being "dismanteled" and as a result when oil prices rebound, the US will not be able to raise production quickly like everyone assumes it will

 

It is true shale drilling is faster than many types of oil and so shale companies can increase production faster than most types of oil. However they will face huge costs if they attempt so

 

All the layoffs being done now to save money means there will be workers shortage in oil industry when they wish to invest again and so they will have to increase wages significantly to gain enough workers back...

 

Additinally secondary companies providing services and equipment for oil companies are being squeezed and are shrinking and so reduced capacity for services and equipment means when oil industry wants to grow again costs for services and equipment will also rise.

 

In short, the industry lowered costs by laying off workers and barga ing with service providers during the downturn. But when they oil industry wishes to grow again, costs will come back to bite them at a much higher costs!!!

[ctherainbow 3,162]

27 minutes ago, Economy said:

All the layoffs being done now to save money means there will be workers shortage in oil industry when they wish to invest again and so they will have to increase wages significantly to gain enough workers back...

Additionally secondary companies providing services and equipment for oil companies are being squeezed and are shrinking and so reduced capacity for services and equipment means when oil industry wants to grow again costs for services and equipment will also rise.

In short, the industry lowered costs by laying off workers and bargaining with service providers during the downturn. But when they oil industry wishes to grow again, costs will come back to bite them at a much higher costs!!!

My brother works in the shale industry, and from his descriptions of the state of the industry/articles I've read, the people being laid off are mostly unskilled/low-skilled laborers, who are not hard to find and re-hire.  

I'd be more concerned about a potential hiccup in revamping development/production caused by an equipment shortage.  Some of the equipment manufactured towards the beginning of natural gas exploration is badly aging, and if manufacturers cut back too far on new equipment, that will be a major issue in restarting exploration/production.

[Economy 52,861]

8 minutes ago, ctherainbow said:

My brother works in the shale industry, and from his descriptions of the state of the industry/articles I've read, the people being laid off are mostly unskilled/low-skilled laborers, who are not hard to find and re-hire.  

I'd be more concerned about a potential hiccup in revamping development/production caused by an equipment shortage.  Some of the equipment manufactured towards the beginning of natural gas exploration is badly aging, and if manufacturers cut back too far on new equipment, that will be a major issue in restarting exploration/production.

Makes sense. U dont wanna give up hard to find high skilled workers unless you have to

 

in any case. If the industry isnt growing hiring of new workers (even high skilled) is muted and so labor costs at very least are capped

 

 but equipment is definitely a big threat. Of manufacturers of equipment shrink their business, then when demand goes back up these pieces of equipments or services will go up a lot in cost