There is a general consensus that the oil industry will never return to the days of $100 a barrel, but it also doesn’t need to. Conventional wisdom suggests that newer technology means $60 a barrel is all that is necessary for most oil companies to generate a reasonable profit, and that number is within reach during the not too distant future.
Is it possible, then, that even newer technology could bring that crucial number even lower? Aaron Hand, Executive Editor of Automation World, seems to think so.
“…while many companies are finding that they can indeed adapt to make an operating profit at $40 per barrel, cost management is still a high priority among 85 percent of the respondents, with key cost-cutting priorities for 2017 including operating expenses and organization restructuring. And 64 percent of the professionals surveyed cited low oil prices still as a top three barrier.
Automation, however, is an area where companies look willing to loosen their purse strings in 2017. According to survey responses, 39 percent expect their organization’s spending on digitalization to increase in 2017. The same percentage say that low oil and gas prices have increased their focus on digitalization, in fact.”
The question, though, is whether or not businesses can make the necessary changes quickly enough. Although there does not seem to have been much publicity about the matter, the three major oil companies in the U.S. have not been doing as well as their earnings reports may indicate.
Chevron, ConocoPhillips and ExxonMobil share signs of impending doom.
- Their combined net income profits of $3.7 billion for last year, compared to $80.4 billion in 2011. While their combined debt of $40.8 billion in 2012 skyrocketed to $95.7 billion last year.
- Their combined long-term debt grew 25% in the past year alone.
- They have all needed to borrow money to pay dividends or cover capital expenditures.
It may be possible for technology to rescue the American oil industry, but it looks like time is running out fast for that to be a possibility.