Oil industry costs are notoriously pro-cyclical, which is one of the main reasons for the pattern of boom and bust that has afflicted in the industry from the beginning. The cost of everything from skilled and unskilled labor to engineering contracts, field services, raw materials, equipment, spare parts and rig hire tends to rise and fall with price of oil. During a boom, prices for labor and equipment escalate rapidly, pushing up the breakeven cost of finding and developing new deposits, and driving the market-clearing price of oil even higher. In a bust, labor and equipment prices fall sharply, pushing down breakeven costs and helping sustain production at an unexpectedly high level despite the plunge in oil prices. Pro-cyclical costs include everything from skilled petroleum engineers and unskilled labor, to fuel, rig hire and drill […]