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Page added on October 22, 2009

Higher oil price has companies drilling again

With oil prices at a one year high, oil companies have dusted off idled rigs and kick-started a global production network that thrives on high energy prices.

Some oil executives have declared the yearlong slump in petroleum over, pointing to an uptick in exploration and drilling operations around the world. At $82 per barrel and growing, oil prices are finally at a level that gets drillers excited.

“We are in an extraordinarily good position to prosper by the recovery,” said Gene Isenberg, chairman and CEO of Nabors Industries. Nabors operates oil rigs in the US, among the hardest hit regions in the world as far as energy goes.

As the oil industry begins reporting third-quarter earnings, the rebound in oil may lead to more jobs in the oil patch as companies spread out in search of more petroleum, especially shale gas deposits around the world.

Whether a sudden rise is prices is good for the industry in the long run, however, is not clear. Consumers slashed spending on energy last year when prices spiked and the recession deepened.

Energy Secretary Steven Chu said this week the return to $80 oil was worrisome because it could slow a global economic recovery if people have to divert more money to energy costs, a concern that is shared by many energy experts.

Last year, energy prices surged as oil producers neared their peak ability for pumping crude. This year, prices are rising for a different reason: the weak US dollar. Investors holding other major currencies, like the euro, yen or pound, can buy dollar-based crude contracts for cheaper when the US currency falls.