Has the US shale oil industry been eliminated?

MohammedAl - Minshawi - Washington

Against the backdrop of the spread of the new Corona virus - which by the end of Sunday May 3 infected one million and 160,000 people and killed 68,000 others - aspects of life in the United States have stopped.  

Most of them are related to energy consumption, especially oil. Cars do not start in the streets, and planes do not fly in the sky. Most factories closed until a while. West Texas crude began in 2020 and its price was $ 63, and on April 29th it reached $ 14 only. The day before yesterday, it rose to $ 25 a barrel. 

All of this raises questions regarding the future of the American shale oil industry, will it continue to be written to it, or will its life cycle near the end. 

Al Jazeera Net is trying to answer these questions and others .. 

WhyDecreasedPricesThe oilDuringMonthsLast?
Recent months have witnessed an unprecedented and unexpected decline in oil demand as a result of the repercussions of the emerging Corona virus, which forced several billion people to stay in their homes, stopped driving cars, riding aircraft and disrupting industrialization, which led to a significant decrease in the import of oil from large consumers, such as China. Japan, India and South Korea.  

This was accompanied by a large increase in supply as a result of a price war between Russia and Saudi Arabia, which prompted them to significantly increase the volume of their production after the collapse of the OPEC Plus agreement. All of this was preceded by an increase in the production of American shale oil companies. 

During the last decade, the American shale oil sector succeeded in breaking the monopoly of OPEC countries in determining the prices and quantities of oil available in world markets, and this prompted the United States to lead the world’s oil producing countries before Saudi Arabia and Russia, and oil prices fell to half of their level during the past decade. 

HowEffectthatOnIndustryThe oilRockyAmerican?
The collapse of global demand to its lowest global levels led to an automatic collapse in the prices of American shale oil with not enough places to store, and global oil prices lost about two thirds of their value this year, bringing Brent crude to twenty dollars a barrel, and West Texas crude prices decreased to negative prices ( -37 dollars) on the twentieth of last month, before returning and recovering a little. 

The fullness of US storage places added to fears and rush to get rid of the future purchase contracts related to this month of May, which should have been sold before mid April 21st. 

Whatthe differencebetweenrawWestTexasRawBrent?
West Texas Crude is the indicator for American oil, and it is characterized by its lightness and an increase in impurities in it, and the cost of extracting it increases to range between 40 and 90 dollars per barrel, and this makes it difficult to have an economic feasibility to extract it unless the price of selling oil reaches rates in excess of $ 60 a barrel as a minimum in most areas of its production. 

As for Brent crude, it is the indicator for oil extracted from Russia and the Gulf states and most of the regions of Africa and Asia, and this crude is characterized by being heavy, which can derive many petroleum products from it, and is also characterized by a low cost of its extraction to reach in some cases to less than ten dollars a barrel, which is what It is able to cope with market fluctuations and price changes. 

WhatRelationshipbetweenMy pricerawWestTexasRawBrent?
Prices are affected by each other. When the price of West Texas crude increases, the price of Brent crude increases, and vice versa, and Brent crude price usually increases by an average of ten dollars per barrel compared to West Texas crude.

Whatsizethis isIndustryatthe statesUnited?
The number of direct workers in the shale oil industry is approximately 350 thousand people spread between 300 thousand wells, and wells are spread in 21 American states. 

Linked to the shale oil industry is a circle of economic activities in which approximately 1.7 million people work, and the average amount of shale extracted by American oil per day during last January was 4.3 million barrels, and this allowed the United States to become the largest oil producer in the world. 

The average wage of a worker in shale oil companies is $ 48 per hour, which is a large figure with an average annual wage of one hundred thousand dollars, which is 40% more than the average annual income of the American citizen. 

Do youColludedRussiaAnd Saudi ArabiaagainstMy ProducerThe oilRockyAmerican?
Many Republicans see that Saudi Arabia and Russia took advantage of the implications of the emerging Corona virus crisis and decided to get rid of their main competitor in the global oil trade, which pushed its entry into the market strongly during the past decade to a significant decline in energy prices around the world. 

Saudi Arabia and Russia can absorb a significant and prolonged drop in oil prices, given the low value of production, unlike US shale producers.  

HowReplyHomethe WhiteAnd CongressOnthis isDevelopments?
President Trump intervened and called the leaders of Saudi Arabia and Russia in an attempt to end the oil price war, and after the failure of the American attempts, many members of Congress demanded that they be prepared to take punitive measures against Saudi Arabia.

Reuters reports that President Trump warned the Saudi crown prince, Mohammed bin Salman, about the crisis during a phone call that, unless the Organization of Petroleum Exporting Countries begins to cut production, it will be unable to prevent US legislators from passing legislation to withdraw US forces from Saudi Arabia. 

Trump and some members of Congress also threatened to impose duties on Saudi oil imports if the policy of dumping markets continues. 

Do youSupportsCongressIndustryThe oilRocky?
Several members of the House of Representatives and Senate are calling on states affected by the drop in the price of shale oil to support the Ministry of Energy with three billion dollars to buy shale oil at low prices to fill the US strategic reserve. 

Democrats oppose this move because of their broad agenda that focuses on pure and renewable energy sources and is trying to reduce dependence on oil and gas for reasons related to their environmental agenda, and others see that there are already many tax benefits enjoyed by companies working in the field of shale oil. 

HowCouldthatimpactDeteriorationIndustryThe oilRockyOnelectionsThe presidencyComing?
The shale collapse in the shale oil industry is accompanied by a historic rise in the number of Americans applying for unemployment benefits, as the number of applications reached more than 30 million during the last week. 

The price war between Saudi Arabia and Russia has pushed the rock drilling companies to follow strict austerity measures with which the workers lost a large part of their salaries, and thousands of them have been laid off, and the number of those who were laid off by July next year is expected to reach 140 thousand workers, or 40% of Its workforce, which is bad news for President Trump, is that the shale oil industry is concentrated in states that usually vote for the Republican Party such as Montana, Texas, Ohio, and Oklahoma. 

Whatcarrythe futureTo manufactureThe oilRocky?
"Even with US oil prices reaching $ 20, 533 American shale oil companies will declare bankruptcy by the end of next year, and the number of bankrupt companies will reach 1,100 companies if oil prices reach ten dollars per barrel," a study by the Energy Research Institute said. 

And many experts predicted a slow collapse of the industry during the next five years, as small companies are bought from major producers, and many companies declare bankruptcy, and instead of 60 companies currently on the American Stock Exchange, the number of companies is expected to reach only 10 after five years.