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DaBike
Member since Jan 2008
7765 posts

Fed economist: Ability to ramp up production is extremely limited

quote:

Calls continue for oil companies to produce more oil to help cut energy prices. Those calls have now joined by calls for refiners to not only produce more gasoline but to cut prices. Among those seeking to educate the public on just how oil markets work are economists in the Federal Reserve banking system.


quote:

Asked by Swartzwelder – with tongue in cheek – why oil companies are “being the bad guys” in refusing to lower prices, Golding stressed that oil companies do not set oil prices, gasoline prices or diesel prices. Those are commodities, he said, that are traded globally thousands of times a day.


quote:

“When it comes to companies producing more to lower prices, two things won’t happen,” he said. “One is we’re already growing production. We anticipate US production will grow by 700,000 barrels a day between the end of 2021 and the end of 2022, the most growth from any producing country in those 12 months. The question is how much more can they do?”


quote:

That means the ability to increase production is extremely limited, he said, and not just by shareholders wanting more returns from public companies. Second, Golding said, the industry has been hampered for over a year now by the inability to hire people or obtain equipment, which frequently has been backordered for six to 12 months.


quote:

“That’s not enough to ramp up much beyond current plans,” he said. “We won’t know what 2023 will look like for companies unto the end of the year. The paradigm of single-digit growth is here to stay. It’s not a function of shareholders and producing profits but how many rigs they can get out there and how many people are qualified to run them. That answer doesn’t show up in the news every day or in political soundbites.”


quote:

Golding, who was with the strategic planning department at Pioneer Natural Resources before joining the Fed, also countered criticism that operators are holding 9,000 drilling permits on federal leases that they aren’t using.


quote:

“If you look out over the last four or five years, the number of permits issued and the number of wells drilled using those permits is roughly 50 percent,” he said. “Companies have permits to have optionality on their leases and don’t fully know what they own at the moment but it’s important to have those permits because they last two years and operators can keep extending them if they think it’s an area they want to get into.”

The other piece of the equation is that between 2,000 and 3,000 wells are drilled on federal onshore lands anyway, he said.

“To be very generous and say 5,000 permits are ready to be drilled, it would take a few years to get through that on top of all the logistical and labor issues we’re talking about. In a lot of ways, the 9,000 drilling permits thing is borderline irrelevant because they’re working through the inventory of permits they have and are doing so as fat as they can.”


Midland Reporter- Telegram


deltaland
UTEP Fan
Member since Mar 2011
75627 posts

Basically like every other industry post covid, there isn’t enough labor and parts availability to increase production.

Our catfish plant is running half capacity right now due to labor issues


dipsydoo3
Member since Sep 2018
99 posts

quote:

there isn’t enough labor and parts availability to increase production.


Where in the hell did all of these people go? What are they doing now?

Go to the grocery, low on people. Go to a restaurant, low on people. The oil industry says they are low on people. Etc. The labor markets are tight everywhere. Did these people just disappear? What in the hell are they doing to pay their bills?

I’ve had this conversation with many people, and get no good answers.


TygerDurden
LSU Fan
Member since Sep 2009
1559 posts
 Online 

quote:

Where in the hell did all of these people go? What are they doing now?


I ask this question all the time…what happened to them ? Retired ? Government cash to sit on job sidelines? The great equalizer may be a severe recession with job losses to balance this out. Something has to give as this can’t keep going like this.
This post was edited on 7/12 at 10:54 am


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DaBike
Member since Jan 2008
7765 posts

quote:

Where in the hell did all of these people go? What are they doing now? Go to the grocery, low on people. Go to a restaurant, low on people. The oil industry says they are low on people. Etc. The labor markets are tight everywhere. Did these people just disappear? What in the hell are they doing to pay their bills? I’ve had this conversation with many people, and get no good answers.


See and hear the same thing. Everywhere you look or turn business are trying to find people. What happened to everyone? How are people living, paying bills, etc. without a job?


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Robin Masters
Alabama Fan
Birmingham
Member since Jul 2010
24722 posts

quote:

I’ve had this conversation with many people, and get no good answers.


Same.

And this wasn’t an issue prior to covid. It’s like the service industry was slashed by 50%.

More legal immigration, I guess is the only solution.


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