Tunstall talks oil at CDC meeting
Dr. Thomas Tunstall has been to Cuero a half-dozen times over the past six years. From his first visit he has preached diversification.
He is the senior research director for the Institute for Economic Development at the University of Texas at San Antonio.
He was here Friday, May 5 as the monthly speaker for Cuero Development Corporation. The meeting was held at Chisholm Trail Heritage Museum.
In those early visits, the price of oil coming out of the Eagle Ford Shale was over $100 a barrel. DeWitt County was one of the top oil producers in Texas.
Dr. Tunstall encouraged cities and counties in the shale play to use their new found revenue to develop growth outside the oil industry. Some did and some didn’t.
One of his favorite quotes is from Mark Twain, “History does not repeat itself but it does rhyme.”
In 2010 the economic impact of the EFS in its 15 primary counties was about $2.9 billion. By 2013 it had topped $70 billion.
And then the bottom dropped out. The price of oil dropped to $25 a barrel.
There were about 20,000 jobs created by EFS in 2010 and by 2013 there were 125,000 jobs attributed to the oil discovery.
In June Dr. Tunstall and his staff will produce its fifth detailed study of the impact of Eagle Ford Shale. This newest edition will reflect the local impact of the rise and fall of oil prices.
In speaking to Cuero area leaders Friday, there was a tone of encouragement in his speech.
Just as 2016 saw oil and gas production making a comeback from its lowest level a year earlier, Dr. Tunstall said 2017 should be even better.
In 2015 oil was $25 a barrel and today it is trading a little over $45 a barrel.
Just a few years ago it cost $20 million to drill a well in the EFS.
Today it is about $6 million due to innovation and efficiency.
Dr. Tunstall said most of the problems with oil prices were attributed to Saudi Arabia and the OPEC members. They had gambled that flooding the market with low price oil would kill the shale play in America.
That gamble failed because of the competitive nature of America’s energy producing companies.
He said the U.S. has 77 companies involved in oil production. That is compared to Mexico with one, Russia with four, China with three, Brazil with one and Saudi Arabia with one.
“What the Saudi’s had hoped to accomplish with their flooding the market really ended up hurting their own membership. We had an impact here but it was interesting to see how resilient the producers were in Texas and other parts of the country. They continued to get more cost effective and in their range of technology,” he said.
Today, the U.S. is still the only country producing shale oil to any degree, Dr. Tunstall said. It has allowed America to reduce its oil imports from OPEC companies.
He said while most believe the price of oil will continue to increase a little, there are too many wild cards to watch.
“Mexico is more focused on their deep water opportunities. Mexico will not get into the shale play anytime soon.”
“Argentina is where the next unconventional shale production will be brought from.”
“We want to continue to watch China. They are overbuilding like crazy there. They are artificially stimulating their economy. We just don’t know how long that can continue. If their economy slows down, then they will be buying less oil and that will have more pressure on oil prices.”
“OPEC is always a wild card. We are never sure what they are going to do.”
To date the EFS shale has produced over 2.1 billion barrels of oil and condensate. Reports indicate there is a little over 10 billion barrels yet to recover.
“So there is a lot of life left in the Eagle Ford Shale,” Dr. Tunstall said.
The United States is producing about 9 million barrels of oil per day.
World wide oil production is at record levels.
That level of production keeps the pressure on oil prices because of increased oil inventories.
“Hotel tax revenues, sales tax revenues and property tax revenues are down somewhat,” he said. “The good news is they are still above the levels they were when all of this started.”
“As painful as it was to watch oil prices drop, it is still better than it was before. The picture is still brighter than it was back in 2008,” he said.