Tulsa World: Crude prices spark an urge to drill

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Crude prices spark an urge to drill
Still, oil at $80 a barrel is not making everyone happy.

Crew members with Anadarko Petroleum Corp. work on a drilling platform near Mead, Colo. With oil jumping to about $80 a barrel, some companies are looking to expand production. Ed Andrieski / Associated Press file

By CHRIS KAHN Associated Press
Published: 10/27/2009 2:21 AM
Last Modified: 10/27/2009 9:08 AM

NEW YORK — With oil up near $80 a barrel, drilling companies are ready to dust off idled rigs and kick-start a global production network that thrives on high energy prices.

Some oil executives have declared the yearlong slump in petroleum over, pointing to an uptick in exploration and drilling operations around the world. They say oil prices are finally at a level that gets drillers excited.

"We are in an extraordinarily good position to prosper by the recovery," said Gene Isenberg, chairman and CEO of Nabors Industries, which operates oil rigs in the U.S.

As the oil industry begins reporting third-quarter earnings, the rebound in crude prices may lead to more jobs in the oil patch as companies spread out in search of more petroleum, especially shale gas deposits worldwide.

Whether a sudden rise is prices is good for the industry in the long run, however, is not clear. Consumers slashed spending on energy last year when prices spiked and the recession deepened.

Energy Secretary Steven Chu said last week that the return to $80 oil was worrisome because it could slow a global economic recovery if people have to divert more money to energy costs, a concern that is shared by many.

"If I'm spending more on energy, that's less I'm going to commit on impulse spending," said Amy Jaffe, the Wallace Wilson Fellow at the James A. Baker III Institute for Public Policy at Rice University.

Gasoline prices have risen substantially this month.

Even in the

oil industry, the jump in crude prices is not universally welcome.

Refiners, who process oil into gasoline, have struggled to make money because pump prices have plunged. They have little choice but to charge more, said Bill Day, a spokesman for Valero Energy Corp. of San Antonio, but demand for fuel is nowhere near what it was before the recession.

That has led to closures and falling supplies of gasoline.

Valero already plans to idle two units at a Delaware refining plant, eliminating 150 jobs. It will also cut 100 more jobs from a New Jersey plant. Another refining company, Sunoco Inc., also plans to idle its refinery in Eagle Point, N.J., indefinitely, stranding 400 full-time workers.

"Clearly, there are more cuts coming across the industry," Day said.

Overall, the third quarter was a struggle for the petroleum industry. American oil giants, which feasted on record-breaking crude prices in 2008, wrestled with thinner profit margins from July to September and should post a series of woeful earnings reports in coming weeks.

Exxon Mobil Corp., Chevron Corp., ConocoPhillips and Marathon Oil Corp. are expected to report that profits tumbled by 60 percent or more. Valero, the nation's largest independent refiner, is expected to post a loss for the second quarter in a row. By CHRIS KAHN Associated Press

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