Micro Oil Producers Harmed By Falling Crude Price
By Lucas Hayas
With crude oil prices down to nearly seventy dollars a barrel, many consumers are thrilled about their newfound savings at the pump. Rod Plinkteron, however, doesn’t share their excitement. Living on Oil Field Road in rural Kansas, he’s made his living pumping crude out of a handful of personal wells. But with oil prices in free fall, his livelihood has been increasingly threatened.
“That’s what feeds my family,” he says with a thin smile. “That’s my job.” His ten derricks earn him about forty thousand dollars a year after taxes and expenses. Between the operating costs and his original purchase costs on the wells, his margins are surprisingly thin in a business normally seen as incredibly lucrative. Unlike the huge transnational producers, Rod can’t use typical business strategies for dealing with low crude prices. At his size, cutting production to increase demand (and therefore price) is simply not an option. Storing the oil and waiting for prices to rise again won’t work either, as he doesn't have enough storage space for his unsold product. But even if both approaches could work, he simply can’t afford to stop selling his oil—he needs to the money now.
The currently falling crude prices are due to a variety of factors, including the United States’ crude oil production increasing by nearly eighty percent since 2008. This increase has occurred faster than predicted, largely due to increasing oil shale extraction. Additionally, demand has been less than expected, with the global economic recovery still progressing slower than previously forecasted. There has also been speculation that Saudi Arabia is trying to keep crude oil prices low in the face of increased competition in what is turning into a geopolitical showdown between numerous parties. The net result thus far has been a drastic decrease in crude oil prices, also resulting in lower gas prices around the world.
Regardless of the international politics at play, most Americans are understandably pleased by the less painful bill at the pump. What’s more, lower gas prices cause the price of many goods to also decrease due to lower production and logistical costs. But for individual producers like Mr. Plinkteron, the savings aren’t worth it. “I’ve had people thank the lord that […] the price of gas has gone down,” he says. “But you know, [my] pastor looks at me and kind of grins, ‘cause he knows what I’m thinking.”
Still, Rod says he tries not to hold animosity towards his fellow citizens. “We love ‘em, god loves ‘em and we’ll see what the price does” he says.
With no end to the price decreases in sight, it’s anyone’s guess where the price of oil will go. One thing is for sure however: if crude oil prices do not rise soon, many of the small producers that inhabit the American West will have to find other work. ▪