When the oil price crashed last year, many assumed that the earliest casualties would be the small, nimble American companies that specialise in getting “unconventional” oil out of shale, tar-coated sand and the like. After all, with their high production costs and heavy debts, these firms were inherently more vulnerable to price shocks than big oil companies, the thinking went.Scott Nyquist of McKinsey, a consultancy, says the price drop has not caused the “immediate distress” that was originally assumed.The firms that have been in trouble are those with dud leases, or which had embarked on big takeovers last year, just before the price began falling.
The recent drop in oil prices could be due to more than just lower demand, according to some analysts, who have suggested that the U.S. could be deliberately manipulating the market to hurt Russia at a time of geopolitical stress.The U.S. has stepped up its efforts towards self-sufficiency with its shale gas industry booming over the last decade, and has become a competitor for major oil-exporting countries such as Saudi Arabia and Russia.
Here in the U.S., the oil drilling boom is due largely to technologies like hydraulic fracturing, or fracking, used to force oil from shale formations deep underground. Producing this oil, Rystad figures, costs an average of $62 a barrel.
"What is really interesting for the U.S. drillers and producers is how long they are going to continue the high activity levels that they have, now that prices are going down," says Per Magnus Nysveen, head of analysis at Rystad.
