Oil and gas exploration in the nation have all but dried up, says the New York Times. Thanks to our lack of an intelligent energy policy, this was inevitable. And it’s also priming the pump for the next commodity-price super-spike.
The amount of oil and gas rigs has gone from 2,400 a year ago to 1,200 today. With the drop in the price of commodities as well as the drop in the global demand, it’s no longer profitable for companies to lay out for exploration.
NY Times: One reason companies need to make cuts is that the cost of drilling and servicing operations, while falling, is still roughly double the 2005 level, while the prices oil and gas companies earn from their production are suddenly below the 2005 level. Meanwhile, the cost of borrowing money for exploration and production has soared recently in the credit crisis.
While this is all bad, analysts expect it’s only going to get worse. The first half of 2009 is expected to be rough on oil companies, many of whom have tried to maintain production to the best of their ability. Watch out for more closed rigs this year and more unemployed rig-operators. And we don’t think there is a ton of money in the stimulus package for these companies.
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