$60 is the new $100…

There is a boom in oil… it’s just not in Aberdeen or Stavanger…

“$60 is like the new $100,” said Dallas Fed economist Michael Plante in a mid-April interview.

Breakeven costs are now as little as $25 per barrel, according to the Dallas Fed’s most recent survey, so energy companies here no longer need $100 oil to make lots of money…

“It is a full-fledged boom,” says Dale Redman, chief executive of Propetro, a Midland, Texas, firm that supplies heavyduty horsepower to drill sites, where energy companies coax crude from the ground with sand and water.

He has tripled his workforce since early 2016, drawing workers from towns and cities hundreds of miles away. Over half of his 1,200 employees make more than $100,000. “What it has done is raised wages for all these folks. But housing and the cost of living has gone up as well.”

Eventually labour costs will rise, and as they are proportionally more expensive than offshore labour costs due to capital intensity, offshore will become more attractive in investment terms. But that will be offset by a productivity improvement. Never underestimate the ability of the US economy to be an efficient mass producer at scale.

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