Falling oil prices end golden age of fracking boom
I can tell you now, there’s not going to be any winners in this, just survivors.
Four years ago The Times reported from Crystal City, a dusty hamlet in Texas that sits on the Eagle Ford Shale, an oilfield that stretches for 400 kilometres. The oil price was hovering around US$100 a barrel and the region was in the grip of a fracking boom.
Blue-collar jobs were paying six figures and a wave of economic migrants had flooded in from other states. The men far outnumbered the women, and the party culture had grown every bit as grubby as the oil jobs those men had come to do. ‘‘There’s gambling, whorehouses, shootouts,’’ one labourer, who had travelled from Kansas, said.
It felt like a new Wild West, but with oil now at US$50, the boom is careering towards bust. In 2012 there were more than 250 rigs working in the Eagle Ford region. Today only about half that number remain. Companies have slashed spending and at the Double C Resort, which had provided housing to oil workers in Crystal City, occupancy has tumbled from full to 10 per cent.
‘‘In 2014 the lay-offs started, and they’re continuing today,’’ Jeff Myers, the owner, said. ‘‘I can tell you now, there’s not going to be any winners in this, just survivors.’’
He is hoping for a relaxation of America’s longstanding ban on oil exports.
In recent years America’s position in the global energy market has shifted profoundly. The US is still the world’s largest net importer of oil, but advances in fracking – a process in which water, sand and chemicals are blasted underground to create or enlarge cracks in rock formations to access petrochemicals – have helped the US to wean itself off foreign supplies.
Last year about 27 per cent of the petroleum consumed by the United States was imported from overseas, the lowest level since 1985. People have started talking about ‘‘Saudi America’’.
Lower prices will have a mixed impact. The average American family is expected to save US$700 this year compared with last year.
However, lower oil prices will also lengthen the time it takes America to cease becoming a net importer of energy, a status it last held in the 1950s. In April the US Energy Information Administration predicted that if oil prices were high, the US could stop being a net energy importer in as little as four years. At current prices, some time after 2030 is more likely.
This time last year there were 1913 rigs working across the US. Now there are 884. The president of Halliburton, the oil services business, has spoken about the end of the ‘‘boom town mentality’’. Shares in Civeo Corp, a company that runs ‘‘man camps’’ – townships built to house oil workers – have plummeted since last September.
In North Dakota, the centre of the US fracking boom, unemployment is rising again for the first time in years.
In January The Dallas Morning News sounded the alarm. In only five years Texas’s oil industry had tripled its production, driving hundreds of billions of dollars into the economy and creating tens of thousands of jobs. Lower prices meant that the go-go years were over. The oil boom was ‘‘heading for bust in a hurry’’, the paper said.
Jeff Myers, Double C Resort