Russia has historically been Europe’s biggest oil supplier, and attempts to wean the continent from Russian oil since it began its invasion of Ukraine in February has sent oil prices worldwide sharply higher. And U.S. oil producers haven’t been pumping more crude to help close the gap, despite pressure from the Biden Administration.
Texas could soon change that, as Russell Gold reports for Texas Monthly, with a new large state oil boom on the horizon.
There hasn’t been much drilling in the past couple of months since the start of Russia’s invasion, Gold says, because most of the big oil and gas companies out in the Permian and operating throughout Texas have been playing it safe with their finances.
“They went through several years where they were losing a lot of money and they promised their investors, ‘Look, we’re going to be nice and conservative and boring,’ ” he said. “They’re giving all their money back to investors, share buybacks and big dividends. So they’re not taking that money and pouring it into new wells right now. The only people really are starting to pick up at all are some of the private companies, family owned and private equity-backed. But that’s a minority of companies out there.”
But last week, Gold said, both Halliburton [and] Schlumberger – two Houston-based oil field service companies that handle specialized work like drilling wells – said on calls with investors that they’re seeing the early signs of a significant upcycle.
“A lot of it’s being driven by this desire for energy security and diversity in oil, and all that’s flowing out of the Russian invasion of Ukraine. Companies are going out and sort of saying, ‘All right, where can we drill? Where can we find oil and gas that is not coming from Russia? We need to replace Russia. Where can we do that?’ And that’s really what’s driving things right now.”
Gold says that demand for oil is not going down despite broader trends globally to move away from fossil fuels and an increase in electric vehicles, which are still a fraction of the cars sold in the United States or globally.
“Now, the interesting question is, if we’re in a period where oil prices and gasoline prices stay above, let’s say, $3.50, $4 for an extended period of time, is that going to drive people to want to buy electric vehicles? And I think the answer to that is yes, absolutely,” he said. “But good luck finding them. Almost every major electric vehicle manufacturer right now is talking about having a backlog, not having enough of them to sell.”
In addition to that desire to replace Russia – one of the top three oil and gas suppliers in the world, along with Saudi Arabia and the United States – Gold says that another factor likely driving a longer and bigger boom is that OPEC is tapped out, without a lot of excess barrels of oil available to put into the market.
“To move away from one of the three largest suppliers in the world, it’s going to take a lot of new drilling and expansion of existing fields, and that’s what’s going to drive the boom for oil and gas,” he said.”If I were out in the Permian Basin, I would expect to see a pretty significant uptick of activity by the end of the year and certainly into next year, all things being equal.”
