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OPEC Deal Will Set Industry On Fire
The Organization of the Petroleum Exporting Countries (OPEC) blinked and America's oil and gas companies won, and now the fracking miracle is set to lead an economic Renaissance. The Oil War damage went well beyond the shutdown oil rigs, which peaked at 1,931 oil and gas rigs in September 2014, to the most recent count of 593.
The industry was on fire as exploration and production (E&P) projects soared 274% in ten years to 2014 when Saudi Arabia decided to flood the world with crude.
Since then, the price of crude has come crashing down, putting hundreds of billions of dollars in projects offline and on the shelf – derailed for years.
In addition to E&P projects, the CapEx - food chain suffered in other areas as well.
Cheap Gas - Not the Answer
I know that for a while, many people thought crashing oil prices meant cheap gas and that it would somehow become the magic elixir for the economy. That was always a false premise as the price for crude is typically determined by supply and demand. And the strength of the economy determines the latter.
However, this time around, there was something more insidious at play. Crude prices were artificially driven down by Saudi Arabia in an effort to derail the fracking miracle in America.
Sooner or later, it dawns on a lot of folks; even top-notch economists think that it’s actually better to have jobs than to save a couple bucks at the pump. Boy was the fracking boom creating jobs, great paying jobs, mostly in America’s heartland where construction of wells and pipelines added billions to the economy.
In fact, the nation couldn’t keep up with the demand of skilled construction and oil industry workers, including welders. According to the American Welding Society in 1988, there were 570,000 professional welders, and that number slipped to 360,000 by 2012. Apparently, there will be a 290,000 welder deficit by 2020.
It’s not only welders. The nation was already positioned for a massive worker shortage (known in the industry as the Great Crew Change) as older workers retire without enough skilled workers to replace them. In many ways, this is a good problem to have, and the opposite of those workers sitting idle because a Middle East ally decides to put them out of business.
According to the American petroleum Institute (API), the industry needs to hire 600,000 workers over the next 20 years.
However, with less government money and resources going to crony clean energy projects, the nation can focus on unlocking all its fossil fuel potential, which means we’ll cry all the way to the bank about a lack of welders.
Just a word to the wise - if your children have trouble with math and are not cut out to be salesman, consider getting them a dirty-fingernail skill because we won the Great Oil War with Saudi Arabia, and now we need workers.
The OPEC Deal
The Organization of the Petroleum Exporting Countries will reduce 1.2 million barrels a day by January, including the following cuts:
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