The price of oil crashed three years ago, sending petroleum economies around the world into recession. The effects buffeted more than just these countries, oil-producing states such as Texas and North Dakota have seen their fortunes shrink as well. While drillers in these states doubled production in the decade that started in 2004, they’ve had to sharply cut back since the year 2014.
The question is, is the age of oil over?
The Signs Indicate Health
When oil prices tumbled two-thirds to $30 a barrel, it wasn’t an inexplicable phenomenon. It happened for two reasons: American shale drillers began to sell their product in large quantities for the first time, creating excess supply. OPEC then contributed to the glut by raising production. There is no mystery – it would have been impossible for the market to have sustained price levels in the face of such production increases.
Production Has Stabilized
While it has taken years, the market today is no longer in oversupply. Markets have shown signs of stabilizing throughout 2017. Both production ad inventories have fallen globally, and the U.S. has begun tapping into its strategic reserves.
Demand has been rising, as well, in nearly every region of the globe.
Aside from the European Union, demand has risen quickly across the world over the past five years – by 16 percent in the Asia-Pacific and Africa, and by 5 percent in the U.S. The EU has been alone in seeing a (modest) decline.
What About the Move to Electric Vehicles?
It’s a valid question – the electric vehicle market is beginning to rapidly grow around the world.
Growth of interest in EV technology hasn’t caused demand for gasoline and diesel to drop, however. Norway is a case in point. The country is a world leader when it comes to the sale of electric vehicles, yet, even Norway has seen a rise in oil consumption – by 1 percent over the past five years.
What This Means for the U.S. Drilling Industry
It’s important to remember that long-term trends are far more reliable than short-term ones. For both the U.S. and the rest of the world, rapid expansion of demand has been a long-term trend that only continues.
With global inventories dropping and prices stabilizing, manufacturers supplying the global drilling industry have begun seeing fresh interest in their products. Sigma Drilling Technologies, a leading manufacturer of products such as mud pump pulsation dampener equipment and other pulsation solutions, has seen investments by rig operators pick up.
Production is rising again. For the E and P industry, it’s finally time to bring production online with confidence. Call Sigma today at (281) 656-9298 to find out how our solutions can help your drilling business.
