Can the U.S. Oil and Gas Industry Outlast the Standoff with Saudi Arabia?

By Tim Stinson, OilPro

In July of 2014, much of the world stared in awe as the price of crude oil fell to a mere fraction of its peak levels. To be sure, after trading at $115 per barrel in June, it fell to $70 per barrel in December, and now is hovering around $49 as of this writing.

Since the rapid decrease in the cost of oil, many experts have pointed to a variety of factors that precipitated the decline, one such factor being the overproduction of oil by Saudi Arabia allegedly in an effort to significantly harm the industry in the U.S; by overproducing oil and artificially decreasing the price of oil, Saudi Arabia has robbed profitability from the domestic market.

Of course, there is no question that falling prices have had a negative impact in some oil-producing states like Texas, where the state lost over 25,000 jobs in just March of this year. That being said, there have been some positive effects as well, and it is likely that the United States will outlast this standoff without incurring catastrophic damage to the oil and gas industry.

What Are the Positive Effects of Saudi Arabia’s Actions?

The actions of Saudi Arabia have undoubtedly hurt the oil and gas industry, with companies nationwide cutting spending and shedding jobs each and every month. On a more positive note, however, this has resulted in decreased gas prices for United States citizens; specifically, the average national gas price is expected to drop to $2.60 per gallon in 2015. This, in turn, puts more money in the pockets of those in the United States, which can further help fuel the economy in other areas.

The Truth for the Oil and Gas Industry

But while low prices at the pump are a pleasant byproduct of oil overproduction, both domestically and internationally, it does not mitigate the damages sustained by the oil and gas industry nationwide. As mentioned before, Texas lost tens of thousands of jobs in a single month, with nearly 60,000 cut across the country from January to May 2015. And some oil and gas companies have even looked to bankruptcy to escape the debts they incurred during times of profit, yet that they couldn’t service when prices dropped.

Does this mean, though, that the domestic oil and gas industry has taken such serious damage from which it cannot rebound? Not likely – while oil prices are sitting beneath $50 per barrel, many believe that this has stabilized, and may even increase slightly in the near future. Hopefully, this in turn will lead to the emergence of a more resilient national oil and gas industry that can look forward to robust growth in the future.