Kansas oil companies scramble to increase production – The McPherson Sentinel

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By Frank Morris Kansas News Service

Soaring gasoline prices are forcing everyone from independent truckers to the U.S. Secretary of Energy to demand that oil companies increase production. They would like and try to do it, but it’s just not that easy.

To understand why oil prices are high today, you have to go back two years to the early days of the pandemic.

Oil prices bottomed out in April 2020; in fact, they fell through the floor. For a time, oil producers had to pay companies to take oil away from them. One day, the price in Kansas even hit negative $47 a barrel.

Some small oil companies have gone bankrupt. In Kansas alone, companies took nearly 5,000 wells offline and production plummeted

But between then and now, the price of oil has gone up about $160 a barrel.

“This is probably the most dramatic price move in the history of the petroleum industry,” said Mickey Thompson, former president of the Oklahoma Independent Petroleum Association. “And it’s not good for anyone.”

THERE IS NO TAP

With the ban on Russian oil imports, domestic crude now sells for around $110 a barrel. This, of course, is not good for consumers, who have seen gasoline prices soar.

The pain is particularly hitting low-income workers, who often drive miles in older cars to work each day and spend more of their wages filling up their tanks. This has prompted demands from fossil fuel users and politicians to deliver more domestic oil to consumers, as if oil companies can simply turn the flow back on.

“There’s no tap,” Thompson said. “Wells capable of producing crude oil and natural gas in this country are producing at close to full capacity.”

But oil companies, especially smaller ones, are struggling to increase production.

“They have trouble getting hose. They have transport problems. They’re struggling to find crews,” said Dan Naatz, executive vice president of the Independent Petroleum Association of America.

Oil companies have been trying to expand for months now, and this has made basic trade supplies, like piping, both scarce and expensive. And pandemic-related transportation issues have made simply supplying from factories to oilfields a major hurdle. On top of that, there is a labor shortage.

“Labour challenges are at the top of the list,” said Ed Cross, president of the Kansas Independent Oil and Gas Association.

Kansas junior oil companies cut up to a quarter of their employees during the tough days of 2020, Cross said. These are skilled, technical and often physically demanding jobs, so staffing is another major hurdle.

“It’s a busy time and we’re seeing production starting to recover, but we’re a long way from where we were before the COVID pandemic,” Cross said.

In Kansas, production is down nearly 16% from 2019, when gas and oil prices were much lower. It’s hard to predict how long it will take to return to 2019 domestic oil production levels, but most experts say it won’t happen until next year, at best.

In the meantime, Thompson said, consumers and politicians are going to have to be patient as everyone tries to work through the next few months.

“You have to understand that nobody in this country, nobody – not the oil and gas industry, not the federal government, not the regulators, not the banks – nobody is the enemy in this deal,” Thompson said.

“Putin is the enemy and he and his army and his military are creating the situation,” he added. “And we must offer some grace to ourselves, to our neighbors and to the people who are doing their best to ease the pain.”


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