The U.S. oil industry is suffering from a severe lack of production as the nation’s output continues to fall.
But some experts say the current low oil price is causing a lot of pressure on the industry to keep producing.
The Canadian Energy Research Institute (CERI) says the number of active rigs is down over half in the last month, as oil prices remain low and production is down.
And that’s not the only indicator of a drop in oil production.
“We’ve seen a couple of very important signs that suggest that, as prices have fallen, production has actually been falling,” says Dan O’Keefe, the CERI’s director of research.
“So I think that the industry is probably going to need to go on a sustained pace of increasing production until prices rise.”
O’Keefe says that means drilling companies need to ramp up production levels and be able to keep drilling.
The CERIs research shows the industry has been ramping up production at a slower rate than expected since the start of 2017.
O’Reilly says the lack of oil supply is forcing the industry into a much tighter relationship with government.
“What we have now is a real shortage of supply and we’re getting into an environment where the ability of the industry and the government to manage that is going to be a big challenge,” he says.
“So there are some very real questions as to how the industry operates and the way the industry deals with it, especially in an environment of a significant fall in oil prices.”
In a recent report, the Federal Energy Regulatory Commission (FERC) predicted that the number and type of rigs needed to be ramped up to keep up with demand and supply, and that the average cost of oil drilling will increase in coming years.
The FERC also said that drilling and other activities could take up to a year to return to pre-peak levels.