Boom-bust cycles are normal for the U.S. oil industry, but that may be changing
STEVE INSKEEP, HOST:
A few years ago, I drove 500 miles across the flatland of Texas - mostly flat. We came over a ridge, and what spread out in front of us was the Permian Basin, a vast region once covered by a sea. It's more recently been a center of the Texas oil industry, meaning it is a traditional scene of boom and bust as prices go up and down. Now companies are trying for discipline and a steadier approach. NPR's Camila Domonoske drills down on this story.
CAMILA DOMONOSKE, BYLINE: The Permian Basin went bust a few years ago, and then boom times came back - but oddly quiet boom times. Not totally quiet.
(SOUNDBITE OF OIL RIG DRILLING)
DOMONOSKE: Unit Drilling BOSS rig No. 404 is looming over the scrubby flatlands of West Texas like a rocket launch pad minus the rocket. Long sections of pipe are added to the drill, pushing the bit deeper and deeper. It's currently about 1,800 feet underground. There are a lot more steps before this well will be producing any oil, but the smell of it is already potent.
STEVE PRUETT: We're drilling with oil-based mud, which is a little stinkier. It's got diesel in it. But it doesn't...
DOMONOSKE: I was going to ask if the smell was from the generators or if it was coming out of the...
PRUETT: No, it's coming out of the mud.
DOMONOSKE: ...It's coming out of the mud.
PRUETT: The reason is water would react with the formations and come in on us. It's really the only way we can effectively drill this rock. Make sure you put a hand on the rail.
Steve Pruett is the CEO of Elevation Resources. This drilling rig - it's part of a mini boom for his company. The rig runs 24/7 for weeks, pulling up rocks from deep underground mixed in with that oily mud. Drilling rigs like this are always running in the Permian, putting new wells into the ground - a lot of them during booms...
(SOUNDBITE OF OIL RIG DRILLING)
DOMONOSKE: ...Just a few of them during busts. But for the last year, as oil prices skyrocketed and then settled, the number of rigs has actually held pretty much steady, right around the middle of that range. Holding steady might sound like, OK, that's not a big deal, but these are U.S. shale producers. Holding steady just isn't what they do. Angie Gildea is the head of U.S. energy at the accounting firm KPMG. She says before the pandemic...
ANGIE GILDEA: When there was an increase in prices, the U.S. shale players would rush in and increase production to try to capture that price increase.
DOMONOSKE: Prices go up? More rigs, which meant more money and more oil and, eventually, too much oil, driving a bust.
GILDEA: Since COVID, what we're seeing is investors are actually demanding more discipline.
DOMONOSKE: Discipline for an oil producer means sending money back to investors instead of firing up every drilling rig you can. Overall, oil production in the Permian is still growing, but gradually, not like it used to. That's good for oil investors who get more cash. It's been good for oil companies. It's not so great for consumers. Keeping supply lower than it could be can be a recipe for higher prices. On the other hand, this steady growth approach has been pretty good for oil workers like Jason Rodriguez.
JASON RODRIGUEZ: We're pretty busy right now, actually.
DOMONOSKE: He works running explosives into new oil wells. In his spare time, he fixes up a '76 Chevy pickup truck with his 12-year-old son, Aaron. At a car show in Midland in West Texas, I asked what he thought about the future.
RODRIGUEZ: Well, eventually, I think the oil field will start dying down and go all electric and have hovering cars.
DOMONOSKE: But not for a while. And Rodriguez, who works 16-hour shifts for 14 days at a time - he plans to retire in 15 years.
RODRIGUEZ: By then, they can do whatever they want.
DOMONOSKE: Whether or not they think oil demand will go down eventually, pretty much everyone in the oil patch agrees there's a lot of money to be made right now.
Camila Domonoske, NPR News. Transcript provided by NPR, Copyright NPR.