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Friday, Sep. 11, 1998
Oil industry hits skids during glut
Consumers' good news is bad news for state
Associated Press
LUBBOCK - While consumers are enjoying cheaper gasoline prices, oil analysts say low crude prices are causing an industry downturn that's costing the state $600 million a month.
The low prices, nearly $5 a barrel less than a year ago, are the result of a global oil surplus.
In trading Thursday, October crude rose 55 cents to $14.67 a barrel, while October unleaded gasoline was around 41 cents per gallon.
``Things are pretty grim,'' said David Garlick, director of research and administration for Texas Independent Producers and Royalty Owners. ``While it may seem good for consumers on the front end, we're all going to end up paying for what is happening right now. This is costing Texas $600 million a month.''
That figure is based on the estimated cost to drilling companies, stockholders, oil company employees and lost potential profits. While crude prices drop, fixed costs for drillers and other oil-related industries remain the same.
``Some companies have just stopped drilling on new wells and are closing down wells they're working on,'' Garlick said. ``What do you do when it costs more to drill oil then you can sell it for?''
Morris Burns, executive vice president of the Permian Basin Petroleum Association, said a number of factors have contributed to the current crude surplus.
``The Asian market collapsed, so less people are filling cars up to go places,'' Burns said. ``The warm winter didn't help because stocks of heating oil weren't used. And there are countries who are exporting far too much oil.''
Because it is costly and difficult to reopen wells once they are closed, state and federal officials are concerned that well shutdowns could permanently make the nation more dependent on foreign oil.
Rep. Mac Thornberry, R-Clarendon, a member of the Congressional Oil and Gas Caucus, has suggested a provision that would give tax breaks on crude pumped from wells that produce less than 15 barrels per day.
``It doesn't offset $10 oil prices but, with the state's tax incentive, it may really make it worth your while to keep (a well) open,'' Thornberry said. ``We're just looking to do whatever we can to help.''
Conversely, some oil companies are being blamed for adding to the glut by drilling more crude in an effort to keep workers employed.
``I've talked to folks who say `I have people who have worked here for 20 years and I'm not going to put them out on the street,' '' Garlick said. ``They may keep cash flowing in, but in the end you'll take a big hit. You're basically shooting yourself in the foot and adding to a huge crude surplus.''
``When you account for inflation, barrels are really selling for about $5 less than they were last year in January,'' Garlick said. ``That's the way you have to look at it.''Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web