Ever since oil prices started plunging last summer, people have been wondering whether the producers responsible for the supply added since 2010 — mostly in the US and Canada — would want to keep pumping. How many US shale wells, for example, would be economically viable in a world where the West Texas Intermediate price was about $45 per barrel instead of $100? It’s now been long enough to get a sense of the answer. Compared to the peak almost exactly one year ago, the number of US rigs drilling has collapsed by 62 per cent, according to Baker Hughes:
Meanwhile, the Bureau of Economic Analysis reports business spending on “mining exploration, shafts, and wells” has dropped about 35 per cent since the peak in the fourth quarter of 2014 (table 5.3.3 of the National Income and Product Accounts), although the number of dollars spent has actually fallen a bit further thanks to deflation (table 5.3.5).