Path Home Shows 2008 Show Archive December 2008 Show 0850 Boom and Bust

Boom and Bust

As oil prices plunge around the world, many fear Oklahoma could face another boom and bust cycle that has been the bane of our state's energy sector. Leaders in our energy industry hope to break the cycle.

Show Dates

Show 0850: Boom and Bust

Air date: December 14, 2009



Rob:  As oil prices plunge around the world, many fear Oklahoma could face another boom and bust cycle that has been the bane of our state’s energy sector.  But despite some rough patches in the oilpatch, leaders in Oklahoma’s energy industry are still cautiously optimistic saying this is the time they hope to break the boom and then bust cycle.

Rob:  Filling up your gas tank now costs about one-half of what it did just months ago.  Good news for consumers, but slowing growth in Oklahoma’s energy industry, a sector of our economy that has insulated the state from a recession that has much of the country in its grip.

Larry Nichols:   And that’s one of the real benefits for Oklahoma is we do have the oil and gas which is a counter cyclical type product, and we are not seeing the downturn that they are having in the other parts of the country.

Rob:  Larry Nichols is chairman and CEO of Devon Energy, and says nothing impacts our state’s economy more than oil and gas.

Larry Nichols:   We’ve got about 13, 14 hundred people here in Oklahoma City that we employ, more outside the city, 5,000 overall headquartered here.  That creates an awful lot of economic wealth and economic growth, because those people are out there buying houses and then going to restaurants, and buying cars, and you know it just creates a lot of prosperity that Devon and the other oil and gas companies in Oklahoma City are doing.

Rob:  Yet as prices fall, so do the prospects for future growth.  Economist Mark Snead says, when Oklahoma’s oil and gas sector sneezes, the whole economy catches a cold.

Mark Snead:  There is a real concern that energy prices could continue to fall well below current levels.  And if that happens, not only do we not have an energy boost, but it acts as a drag on state economic activity.

Rob:  Talking about energy prices.  Is there a make it or break it point?

Mark Snead:  We think it’s clear in the data that in Oklahoma, 45 to 50 dollar oil and the 6 to 7 dollar range for gas is where these companies sort of pivot from expanding aggressively to contracting aggressively.  We don’t believe the industry grows slowly or contracts slowly.  It’s all one way or the other.

Rob:  That’s because if global demand slows, prices fall and investment capital for exploration dries up, hurting not just oil companies but all the industries that surround it.

Tom Golden:  Our sales have increased probably by 500 or more percent, and half of that is going overseas, outside of the United States.

Rob:  Tom Golden is president of Tulsa based Midwestern Manufacturing, a company that focuses on the niche market of converting tractors and bulldozers into side boom-pipe layers for the oil industry, a conversion that saves the customer millions of dollars and is in high demand around the world.

Tom Golden:  We all tend to focus on our own neighborhoods, and our own schools, and our own mall, but actually it’s a big world out there, and with the internet and the capabilities of wire transfers and ocean freight the way it is, it is a very big market that no one should over look.

Rob:  Now if you lived through the 1980’s, I bet you’re thinking, we’ve seen all this before.  And for that, you are partially right.  But the big difference today is in the solution that looks towards both technology, and believe it or not, alternative fuels.

Jeff Fisher:  Horizontal drilling has been the big breakthrough, and the application of new stimulation techniques, and of course a lot of geoscience technology and understanding how these reservoirs produce, how to find them, how to complete them and bring the gas to market.  So it’s been a lot of new technology, very much emerging in the last 4 and 5 years.

Rob:  Chesapeake vice president, Jeff Fisher, says new drilling methods allow the company to acquire natural gas from areas not typically high in production.

Fisher:  The field that we have, that I just discussed, could not have been discovered without 3-D seismic.  And that’s only been in the last 20 years that we’ve been able to develop the opportunity to shoot 3-D seismic where we have.  And even in just the last few years, and every year going forward, the computer capacity for being able to image these 3-D images continues to grow.

Rob:  Yet the big push for the future will not be how natural gas can be found, but how it will be used.   The U S’s troubled car industry has been reluctant to manufacture compressed natural gas vehicles.

Up to, here recently, we had vehicles that were capable of being converted to compressed natural gas.  The demand wasn’ there though.  So do you keep producing those when the demand’s low?

Rob:  General Motors vice president, Craig Eppley, says ultimately consumer demand will determine the success of compressed natural gas vehicles.

Craig Eppley:  Well, it is a chicken or egg.  Do you produce the vehicles and then can’t go find the fuel, or do you produce the fuel?  Because if they’re out there, the manufacturers of the fuels are producing it, but don’t have vehicles to buy it, why would they put pumps just for that?  So it’s the chicken or the egg.  Hopefully, and it looks like, we’re kind of growing together at the same time.

Rob:  A switch Oklahoma oilmen say is not just good for business; it’s good for our country.

Tom Ward:  Over time we are going to have to find a way to use less oil and to use more natural gas; because it is our opinion, as an industry, that we can produce more natural gas, and as we are seeing, that oil is a little bit harder to find.