Written by: T. Boone Pickens CEO at BP
If I walked into a coffee shop in the Permian Basin or somewhere in the Bakken Shale, I’m sure I’d see a lot of oil and gas guys sitting around staring down at their shoes. You know what I’d tell them?
“Fellows, your faces are so long it’d take two barbers to shave you.”
Everyone knows that America’s oil and gas industry is in bad shape. Or is it? On the surface, the numbers look pretty grim. Last summer, oil was trading north of $100 a barrel. Last month, the price of oil dropped below $45 a barrel. That’s great news for consumers and for companies with high transportation costs, but it’s been a rough ride on oil and gas producers.
Thanks to oil’s steep slide, more than half the drilling rigs in the field have been idled. Fewer rigs mean smaller payrolls, which is why Schlumberger laid off 9,000 employees in January and another 11,000 a month or so ago. Baker Hughes also cut payrolls, and so has Halliburton. According to Graves & Co., a Houston consulting firm, energy companies have let go more than 100,000 workers.
But if you take a longer look — which is what I’m paid to do – the future of the oil and gas industry isn’t that bleak. For the first time in 40 years, we’ve got OPEC on the run. The smaller producers, countries like Venezuela and Iran, want to cut back production and push the price up. But Saudi Arabia won’t have any of that. They want to undercut everyone, especially America’s oil and gas industry in the Dakotas and in Texas.
Meanwhile, the U.S. has become the world’s swing producer. Thanks to our ability to ramp up production, America is playing a key role in setting the price of oil. That hasn’t happened in decades.
Price swings like this are nothing new to me. I got a geology degree from Oklahoma State in 1951, and I’ve seen the price of crude collapse by more than 50 percent six times since President Reagan was sworn in. If I were 25 and out of job in Midland or Williston, I’d certainly be down in the dumps. But I’m almost 87. Here’s what’ll happen next.
The rig count is down, and so are U.S. production numbers. Soon families across America will hit the road for summer vacation. That’s when the price of gasoline will start to inch up. The truth is, it already has.
By the end of the year, I predict the price of oil will stabilize around $70 per barrel. Guess what happens then? The rig count will start to climb. Furloughed workers will get rehired. Do you want to guess what happens when the price gets back above $100? Those coffee shops I was talking about will all be empty.