Price of oil increasing, offers hope for industry in area
NATCHEZ — After a long period of lingering near the $2 mark, the price at the gas pump is nearing $3 per gallon, but what does this mean for oil and gas industries in our area?
Chandler Russ, Executive Director of Natchez Inc., said the price spike is simply caused by demand and the economy during this time of year.
“Over time, you see gas prices increase as the summer progresses because people are traveling more,” Russ said. “The demand is higher.”
He said the leap in gas prices has a direct correlation with the value of oil. Locally, fewer companies drill when oil prices are low because the drilling process is expensive, Russ said.
“We’ve seen some cut back in production … and oilfield output has gone down in the last year,” he said. “When the price per barrel goes down, rigs shut down. Economically it just makes sense to do that. We’ll continue to see area drillers return while the price is higher.”
Russ said crude oil would need to sell at $70 to $80 a barrel in order for drilling to be viable in the Miss-Lou area, and in the past few weeks, he said the value dipped to under the $70 line.
Jody Helbling, the general manager of Energy Drilling, said that price bracket is not the same for other parts of the country.
“You can’t generalize that number because it’s different all across America,” Helbling said. “You can be profitable at $30 a barrel in Texas, … but oil prices staying above $50 (per barrel) is definitely better.”
As of Friday afternoon, crude oil was valued at $65.06 per barrel, and Helbling said that price will continue to change due to a number of factors from the production in other regions to issues with product transportation.
“(The value is) at about $65 today,” he said. “I think that will continue to fluctuate. … We’ll kind of go through a transitioning phase for a little bit and the price may start to climb again in the next two to three months.”
How much is too much? Russ said while putting stress on the pocketbooks of consumers filling up, the higher gas prices could certainly be beneficial to the oil industry and even allow more job opportunities to open up when the rigs start working again.
“When the price of crude oil … was at $100 a barrel you had every rig in the area working,” he said. “What the balance is there, I don’t know.”
Russ said cost per barrel has been over the $80 mark in the past five years, and he believes it will be again.
“Natchez is a big hub for both the oil exploration and the service,” Russ said. “It means 1,000 to 1,200 jobs in the region — good paying jobs. … Those jobs have gone away and are coming back.”
Helbling said he has already seen the number of jobs move and increase within Energy Drilling.
“We’ve probably hired about 60 people in the last two to three months and kept about 20 of those,” he said.
Many Energy Drilling employees have been moved to Texas, Helbling said, where they are constructing a new rig.
“We’re building a new 2000 horsepower rig in Houston, putting some local hands there,” he said.
Helbling said he is hopeful for the future of the oil industry in local area.
“There’s definitely talk about the Tuscaloosa Marine Shale coming back on,” he said, referencing an oil deposit south of Natchez that was heavily explored when oil prices were at their peak a few years ago. “Along the (Tuscaloosa Marine Shale and Austin Chalk formations) are the big opportunities for employment in our area. I’m feeling pretty confident those will come back, but we’re not there yet.”