We're either in a boom or bust
Q: What is the effect of higher oil prices on drilling in the USA?
A: It's had a dramatic effect on the industry here. You have to put things in perspective. We had a significant price increase in 1999, and we immediately saw dramatic increases in the number of wells being dug — from a low of 745 to a little under 1,300. That has not happened this time. That's because by the time all 1,300 wells were up and running back then, the price (of oil) had already fallen down below where it had been before.
This industry has always gone jumping up and down. We're either in a boom or bust. We don't do so well leveling things out. But that has changed. We were so recently hurt by the fall in prices in 2000 that things are moving a lot slower now. We're approaching 1,300 rigs, but we're not there yet.
Q: Why so cautious?
A: One significant reason is that when everything went downhill, people who had lost their jobs or their money said they'd had enough of this, and they left the industry. Now, when we have the money to drill, we have a people shortage. It's hard to train people to run rigs, train them so they don't get hurt. It's a dangerous job.
For the first time, even though we've increased by 80% the number of actively drilling rigs, we've seen almost no increase in production. We're maintaining what we had been producing. No significant new reserves (in the USA) have been brought on line. That's because North America is a mature province; 1998 was the peak in production for natural gas, and 1970 was the peak for oil. We're having to drill deeper, which is more expensive and takes longer, and for smaller reserves.