DEMAND IN A DOWNWARD SPIRAL

The only things rising are bankruptcies and distressed asset sales in the US shale industry WE’VE never had a downturn like this, that affected shale on a global basis as much as this has,’ says Daniel Lippe, managing partner at Petral Consulting Company in Houston, Texas. ‘Never in 100 years has demand suddenly evaporated as it did in March of 2020.’ COVID-19 quarantines kept cars in driveways, planes in hangars and offices workers at home. With so many vehicles avoiding fuel stops, the oil and gas supply chain backed up. Lippe observed: ‘The distribution system is a self-regulating mechanism. You cannot produce crude oil if the distribution system is full. The amount of storage we have is a small percentage of the total production. We have enough crude oil inventory to last, at most, 30 days.’ DROPS IN OIL PRODUCTION The system indeed having become full, production pullbacks were drastic and immediate. According to data from the US Energy Information Administration (EIA), total US crude oil production declined by 21.9% between December 2019 and May 2020, with the Federal Offshore Gulf of Mexico falling by 18.2%, Alaska by 16.0%, and the Lower 48 states...