Oil prices dipped below $30 a barrel this week, and oil companies are worried the prices could go as low as $15 per barrel — the current crude price in Canada.
Canada’s handful of oil refineries, discount rates, and high transportation costs make it more difficult to get gluts of oil from the production stage to the consumer, causing the country’s prices to crater, analysts tell The Wall Street Journal. North Dakota has been plagued by low oil prices for similar reasons.
Crude oil sold by the Organization of the Petroleum Exporting Countries (OPEC) fell to $25.69 a barrel Wednesday, with the overall price of a bushel of crude dropping to $30 a barrel.
Tanking crude prices, which at one point in 2014 were selling at $100 a barrel, are causing oil producers to grasp at straws, looking for reprieves. Insiders believe the low oil prices are the main culprit behind Friday’s 400-point slide on Wall Street .
“We’re dying on the vine,” President Skip Homeier of Bi-Petro Inc., an oil company running 150 oil wells in Illinois, told Wall Street Journal reporters. Oil in Illinois fell below $30 a barrel in early January.
“When oil was at a $30 to $35 barrel, I had more wells making money,” Homeier added. “Now, I have to look at oil down to $23 a barrel.”
North Dakota’s crude oil is considered high quality, but because there is so much of it, the state’s two refineries cannot handle all the supply, causing prices in the state to spiral into the cellar.
The situation is dire, President Gary Leach of the Explorers and Producers Association of Canada told The Wall Street Journal. “It’s hard to believe anybody at a corporate level is making any money,” he said.
BP announced Tuesday it will lay off 4,000 workers from its oil exploration business with Brazilian oil producer Petróleo Brasileiro S.A. because of the drop. The oil company will also dial down its production targets.
Last September, OPEC published a report allegedly showing oil producing nations winning their price wars against hydraulic fracturing, or fracking — a method used to pull natural gas trapped in the ground.
It costs $10 per barrel for Middle Eastern countries to get oil out of the ground, whereas it takes a great deal more that that — approximately $65 per barrel — for those pumping gas out of fracked wells.
“In North America, there are signs that U.S. production has started to respond to reduced investment and activity,” the report states. “Indeed, all eyes are on how quickly U.S. production falls.”
The oil industry could see a break as oil producers may soon be pumping and dumping oil reserves into European countries thanks to Congress’ vote to lift the 40-year oil export ban. The decision could turn the United States into an oil-exporting nation.
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