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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: diana g who wrote (24225)	6/16/1998 1:08:00 PM
From: pz	Read Replies (1) \| Respond to of 95453

From our local paper...it kind of gives an idea of what the local independent oil producer is thinking. texnews.com Oil price slides to $9 per barrel By SCOTT SCHOLTEN Staff Writer Oil's local posted price continued its year-long slide, closing at $9 per barrel Monday, down 10 percent from its previous $10 per barrel close. That's bad news for producers and probably good news for consumers. "I don't want to sound alarmist, but it's pretty drastic," said Allan Frizzell of Enrich Oil. Post prices are now half what they were a year ago, Frizzell said. In anticipation of higher prices, stripper and marginal wells will likely be the first wells shut down. Plans for further petroleum exploration will likely be shelved. With average oil-lifting costs in the $15 per barrel range, independent oil producers, who operate 85 percent of U.S. oil and gas wells, will not be able to withstand such financial hemorrhaging, he said. Posted prices are lower now than during the 1980s oil bust, Frizzell said. Another oil industry shake out can be expected if the trend continues, or if oil prices simply remain where they are, Frizzell said. Nationwide, ranks of independent oil producers have already shrunk from 18,000 in 1986 to 2,900 today. "You'll see drilling activity diminish drastically in the next 30 to 60 days," said Bill Stevens, executive vice president of West Central Texas Oil and Gas Association. "I do not believe many analysts saw this one coming," Stevens said. "When you look at cost of living adjustments, these are 1950s gasoline prices." Though the price plummet cannot be traced to any one factor, Stevens said there are three main culprits: OPEC members failing to stick to production reduction declarations; low demand around the Asian Pacific Rim's cash-strapped economies; a glut of petroleum products that would have been used had El Nino not softened last winter's demand for heating fuel. Gasoline prices of 90 cents per gallon are a near certainty, Stevens said. Even though crude oil prices and gasoline prices do not go hand in hand, their loose connection means people are likely to see pump prices somewhere in the 80-something cents per gallon range, Stevens said. He's already getting calls from concerned rig workers, wondering about job stability. Despite marginal and stripper wells accounting for about 1.5 million barrels of U.S. daily oil production, shutting off these wells will likely not have the price rebounding effect one might expect. Economically pinched Asian countries that once thirsted for oil are now exporting their excesses since people there are trimming back on gasoline consumption, Frizzell said. And U.S. markets will readily absorb it. "Asian countries not using their crude are roaming the world looking for someone to buy it," Frizzell said. Some oil producers are calling for government intervention. To keep U.S. wells hammering away, reducing dependency on foreign oil, they want government-imposed price floors like the U.S. agricultural sector once received or an imported oil fee.