What Will $70 a Barrel Oil Mean to the Eagle Ford, Texas Economy?

$70 a barrel oil, not seen in three and a half years, will have an impact in the Texas oil fields, but experts agree it won't be anything like the oil boom experienced in the Eagle Ford region, south of San Antonio in the earlier part of this decade, News Radio 1200 WOAI.

First of all, Thomas Tunstall, who is an economist at UTSA who studies the Eagle Ford Shale Field, says drilling companies and the banks that lend to them are much more circumspect about the ups and downs of the oil industry, and will not be rushing in to drill and invest like they were in 2012.

"The increase in rigs and production has been occurring much more incrementally," he said.  "I think we are going to see more of that.  The energy companies are being more cautious, after they got blind sided by the rapid drop in oil prices."

He says many Texas banks have just now gotten out from under the piles of bad oilfield loans that they were stuck with with prices plummeted to $30 a barrel in the winter of 2014-2015 after OPEC drastically increased production to try to damage Texas shale producers.  He says shareholders of the oil companies also 'punished' the producers for the losses they have experienced over the past two years.

Tunstall says the higher prices are largely due to a so far successful effort by OPEC and non OPEC member Russia to reduce oil production in an attempt to raise prices.  But he says now that prices are up, the lure of all that easy money may make Russia, with its newly re-inaugurated President Putin, as well as OPEC nations, 'cheat' on their production cuts, and that could quickly spell the end of oil prices at this level.

"Each time the price goes up, somebody is tempted to start producing more," he said.  "This is very likely to lead to OPEC nations deciding they can cheat a little bit."

For many OPEC nations, including Saudi Arabia, oil exports is their only source of foreign exchange, and the lure of being able to flood the market with $70 oil, at least until that flood forces prices down, may be too attractive to pass up.

Tunstall says one thing we will definitely not see is the massive oilfield employment that overwhelmed the small towns of the Eagle Ford in 2013 and let to a new noun entering the south Texas vocabulary: man camp.

"These generation three rigs are much more efficient, and similar amounts of il can be produced with much less people and capital, and we are seeing that happen."

He says automation is one way the producers fought back against low prices by cutting their break even levels.  Many Eagle Ford rigs are remotely operated from Houston or San Antonio, with one engineer controlling several rigs.

Tunstall says this will actually be more beneficial growth in the long run, because it will be easier on the small communities, lead to much more manageable and sustainable growth, and will cushion the blow when the next oil price dip comes.

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