Gloomy Survey Shows U.S. More Dependent On Foreign Oil
HOUSTON (AP) _ The plunge in oil prices and subsequent decline in exploration is permanently changing the U.S. oil industry and leaving the nation more dependent on foreign oil, according to a survey released Monday by Arthur Andersen & Co.
″At today’s prices, it doesn’t make economic sense to undertake exploration in the United States,″ Richard Adkerson, managing director of oil and gas services for the accounting firm, said. ″We’ve just got to have higher prices.″
Even an $18-per-barrel standard, mentioned by OPEC oil ministers currently meeting in Geneva, would do little to improve the plight of the domestic energy producers, he said.
″At $18 per barrel, you do not have high enough prices to stave off higher levels of imports,″ he said.
Prices are currently hovering between $14 and $16 a 42-gallon barrel, up from earlier lows this summer of $7 to $12 a barrel, but still about half what they were last November.
Adkerson predicted that more layoffs, mergers and bankruptcies would take place in American firms as the price slump continues.
He acknowledged that most Americans are enjoying lower energy prices and that the decline in inflation, fueled by lower energy prices, has been beneficial. But he warned that the benefits may be short-lived.
″It’s virtually impossible to convince people to take a long-range outlook,″ he said. ″The thing to wake people up is when they have to wait two hours to get gasoline. And that well could be in the cards.″
The accounting firm’s annual survey of 375 domestic oil companies shows sharp drops in capital expenditures and re-investment and deteriorating replacement of reserves, with independent producers taking the hardest hits.
″The lower level of expenditures will result in lower addition of reserves in 1986, 1987 and 1988,″ Adkerson said.
In 1985, according to the survey, less than 65 percent of the nation’s oil was replaced. In prior years, it was more than 100 percent.
″The excessive supply of oil worldwide, the depressed demand for energy, and the challenges caused by deregulation have led to this situation,″ he said. ″A realistic appraisal provides no evidence that a significant economic recovery will occur in the near future, particularly for the U.S. oil and gas producing industry.
″Survey results, combined with ongoing developments in and future expectations about oil and gas markets, indicate that these conditions will likely remain with us for the rest of this decade.″
For U.S. oil firms, the short-term effects of the situation will be continued drastic reductions in cash flow, poor financial results, increased interest in buying and selling reserves and more consolidations and business failures, the accounting firm said.
″The very significant falloff in capital spending will take its toll,″ he predicted. ″We’re going to have less oil and natural gas.″