In a blog posting by fuelfix.com on September 21, 2015, Wood Mackenzie, the energy research firm, estimated that at $50 oil, the $1.5 trillion oil industry could not make money. Further, while oil producers are aiming to reduce project costs by 20 to 30%, savings may only be in the range of 10 to 20%.
The blog authors wrote that in the U.S. and Canada, 1,284 drilling rigs have been idled since this time last year and the International Energy Agency estimated that U.S. share oil production will decline by 400,000 barrel per day next year.
The oil industry has reduced jobs by an estimated 196,000 worldwide.
Wood Mackenzie believes that prices will start a recovery in 2017. Not everyone agrees with them. There is a chorus of voices stating the low oil prices are here for a sustained period of time. On September 22, 2015, Carl Bildt, the former Prime Minister and Foreign Minister of Sweden posted a statement on Twitter that the word in Stavanger, the oil capital of Norway, was low oil prices were the new normal.
The prospects of an extended period of low oil prices will have a profound impact on exploration and production in Ohio. Leases need to remain in production beyond their initial fixed term in order to remain enforceable. All of the support, servicing and ancillary services to the industry will be reacting to pricing. The dramatic effects of low oil prices will reach far and wide. Prompt and careful evaluation of lease portfolio terms and consideration of cost-effective options to preserve significant investments in the Utica and Marcellus shale plays is essential.