Energy companies to cut back on spending

Fuel Fix:

Saudi Arabia’s run at U.S. oil-company profits could inadvertently drive down costs in the shale oil patch, making the high-cost business more competitive, a Barclays analyst says.

For now, though, U.S. oil producers and oil field service firms are expected to cut deep into the North American shale boom. Oil spending in the United States and Canada could fall by as much as $58 billion this year if petroleum prices remain at current low levels, according to a Barclays survey released Friday.

That would be a 30 percent cut to last year’s estimated $196.1 billion in spending, largely driven by a retreat from zealous spending among North American oil companies. Barclays says, however, the cut is a moving target: Oil prices have fallen rapidly over the last four weeks as the British bank was collecting input from 225 companies.

“They all know they’re staring down a cliff, they just don’t know how far it goes yet,” said Dave Anderson, an oilfield service and equipment analyst at Barclays, in a conference call Friday. “We need to see a supply response, not just in production, but also in services.”
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Congress's response appears to be to raise the gas tax ostensively to do infrastructure spending, but that is not as stimulative as a long term investment in greater production.   These cut backs are going to mean fewer new jobs and will also mean a drop in sales tax revenues for the states involved in oil production.