What $100/barrel oil means in the oil & gas services business

One would think that with the price of gas hovering at $3.00 +/gallon and finally hitting the $100/barrel mark this past week, that everything oil related would be doing well. Guess what, we are hitting challenges we've never seen before in this industry.

First of all, try being a service company, whether onshore or offshore. Equipment is hard to find. If you are working in the offshore environment, ask anyone who handles the barges, ships, tugs, rigs, etc., how easy it is to find available equipment at a reasonable price. It won't and can't happen. Then, say you are an operator in the Gulf of Mexico...just one vessel can run up to $500,000/day to lease, and the vessel is only available for a certain period of time. Should the vessel not finish the job or become disabled due to weather or accident, then the whole project goes off schedule, causing the company to lose millions per day both in vessel expense and production...either cut totally or slowed significantly.

I'm not saying that the majors aren't posting a profit. Certainly the number one and two companies have 10 year plans in place and will always be a good investment. What I am trying to say is that the oil industry is not living in the land of gold fixtures in our offices and the lavish days associated with former boom times.

If you are reading this and are unhappy about the price of oil, consult Wall Street, Venezuela, Iran and West Africa to see what's really happening. The balance between supply and demand is fragile, and I don't think we will be seeing even $75/barrel oil anytime soon.

I had hoped by 2010 that this country would be further along in solar power or alternative sources of energy. I can remember being a young 20-something and smarting off to my oil industry bosses years ago. Guess what - it ain't happened yet! As long as oil remains a highly valued commodity, we're stuck!

Road Construction Everywhere

These days it's not easy to get anywhere in West Houston. The Sam Houston tollway (known as Beltway 8 to locals) @ I-10 has closed access ramps to I-10 through September 2008. This means you can no longer access I-10 in any direction and will have to find an alternative route to the tollway. The olds ramps will be demolished and new ones will be put into place. Opinion: Why didn't Texas DOT make a 40 year plan, instead of allowing that money and structural work to be torn down after only 20 years! I'm mad because they've wasted our tax dollars.

Most roads north and south of I-10 from Highway 6 to the 610 loop are under construction. Be sure to plan an extra 30 - 45 minutes into your schedule should you visit West Houston anytime during 2008.