But with the Russo/Ukraine war still raging and only getting worse, the pipeline has been used as a pawn on both sides of the conflict, with the Russian aggressors threatening to turn the gas flow off while Ukraine and its NATO allies threaten to boycott the pipeline altogether, regardless of dire need.
Now, the pipeline has allegedly been “sabotaged,” with Russia blaming the U.S. and Ukraine for the damage and the U.S. blaming Russian President Putin. Who or whatever is to blame? One thing is for sure, the global gas and oil crisis just got a heck of a lot worse.
Enter U.S. gas and oil well services. Ever since the energy shortage that began in America not with the war but instead with a pen back in early January of 2020 when then newly elected President Joe Biden signed an executive order effectively crippling what had been a robust gas and oil sector, the price of energy has doubled and some instances, tripled.
But much of that has changed now that the administration has been forced to alter its course (to a degree) and asked oil producers to up production. According to a new report from Oil & Gas Journal, the action in the gas and oil production industry has increased at what’s being described as a “robust pace.”
Says gas production company owners and executives surveyed by the Dallas Fed Energy, the “oil well business activity index,” which is said to be the broadest measure of various conditions that energy companies face, has stayed steady at a high of 46. However, this number is said to be down from 57.7 in the year’s second quarter.
So, what does this indicate? That oil and gas production has slowed somewhat but remains pretty solid going into the end of the year.
Exploration and Production
Executives at exploration and production, or E&P companies, were quoted as saying that gas and oil production increased at almost the same pace as earlier in 2022. That said, the oil production index remained stable at around 32 in the third quarter of the year, while the natural gas production index stayed the same at approximately 35.6.
However, steady and/or increased production doesn’t come without cost increases which inevitably get passed on to the consumer. Production of oil and gas increased for the seventh straight quarter. At the same time, the index highs nearly reached record proportions.
For oilfield service production companies, the “input cost” stayed high but slipped slightly to 83.9 from its all-time high. Not even one of the 58 oilfield service companies that responded to the survey reported lower input expenses.
For all E&P companies involved in the survey, the index representing the exploration and development expenditures came in at 64.7, slightly down from the second quarter of 70.6. On top of this, the index for the operating expenses with leases came in at 70.2, down from the summer driving season high of 74.1.
Supply Issues Persist
It should be noted that it is still taking far too long for oil and gas production firms to get the equipment and materials they need to function at maximum capacity, and this also hurts the consumer in the short term.
The supplier delivery index is said to have remained at its spiked 28.4 level during the third quarter of 2022, which is slightly lower than the 31.9 experienced during the summer months. Oilfield firms reported that while “the measure of lag time” for equipment and material deliveries declined to 21.1 from 36, it remains far above average.
Again, this costs companies valuable time and results in decreased production.
Good News and Not So Good News
The good news for the oil and gas production industry is that labor market indexes stayed elevated which means steady growth in employment, wages, and hours. The overall employment index was able to post a seventh consecutive reading in positive territory having increased to 30 in the third quarter from 22.6 in the second quarter.
The survey also demonstrated that the aggregate employee hours index reached a historical high of 33.3. Wages and benefits for oilfield workers stayed elevated but unchanged from previous months at 47.3, while the overall consumer price index, or CPI, is still on the rise.
The bad news is that oil and gas production companies’ optimism took a dive as the index fell 33 points. At the same time the uncertainty measurement spiked to almost 36 from 12.4 in earlier months.
Optimism waned somewhat this quarter as the company outlook index posted a ninth consecutive positive reading but declined a sharp 33 points to 33.1. The overall outlook uncertainty index spiked from 12.4 to nearly 36.
Nearly 53 percent of E&P firms have reported a major increase in uncertainty for the final quarter of 2022 and going into 2023.