While there may be some reason to believe that oil markets have hit bottom, Oil Change International is questioning whether the U.S. shale industry will have the capacity to ramp up production after prices begin to rise.
“Restarting production overnight is just not going to happen. The shale industry may have cut itself too close to the bone to be able to start running again,” Oil Change’s Andy Rowell writes on EcoWatch. “The industry has shed more than 100,000 jobs in the last year and these cannot be replaced at a click of the fingers. Some 60% of fracking equipment is idle or offsite.”
Rowell cites a variety of analysts who believe shale producers would be in no condition to take advantage of a higher global price for their product.
“As oil prices show some signs of stabilizing, American producers and oilfield services companies are warning that they may not be able to jump-start drilling,” the Wall Street Journal reported. “Many independent companies are too financially strapped, have let go too many workers, or have idled too much equipment to immediately ramp up again.”
“The balance sheets of these shale-only producers have to be repaired for them to get back to drilling,” Hess Corporation CEO John Hess told the Journal. “That’s going to curb any recovery.”