(Bloomberg) — US oil prices are more than high enough to make drilling new wells profitable but some shale bosses say they’re hesitant because of political and regulatory “uncertainty” that won’t be settled until the November election, according to the Federal Reserve Bank of Dallas.
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“Until the next administration is decided, we’re in a state of flux when it comes to making certain business decisions,” an unidentified oil executive said in the Dallas Fed’s quarterly energy survey released on Wednesday. “The decision to invest the immense amount of capital needed to provide these vital resources cannot be made if the current level of uncertainty isn’t changed,” another said.
Drillers in the Permian Basin, North America’s busiest oil field, told the survey they could profitably bore new wells with a crude price of $65 a barrel, well below the $83 actual price during the period in which opinions were gathered. The snag, however, is concern that the Biden Administration may impose costly regulatory changes that would gut future profitability, survey respondents said. The Dallas Fed’s reports are widely read for the anonymous comments that offer an unfiltered view on a range of topics from OPEC and geopolitical trends to the White House.
Oil executives are slightly more bullish on crude than they were during the final three months of 2023, forecasting prices to end the year in the $80-to-$85 range, roughly $5 higher than before. The survey was conducted March 13 to 21 and involved 144 companies engaged in various sectors of the oil and natural gas industry. The Dallas Fed’s region cover Texas, northern Louisiana and southern New Mexico.
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