A video from The Independent says the drums cost about $99 each — three times as expensive as the oil they carry.
However, cheap oil isn’t giving the US economy the expected boost. It’s also impacting a wide range of industries beyond oil and gas, from chemical companies to recyclers and environment, health and safety software suppliers.
Crashing crude prices mean it costs less for plastics companies to use virgin plastic than recycled materials. Plummeting oil prices also have serious ramifications EHS software suppliers because the oil and gas industry is their largest customer base, according to a Verdantix report. And yesterday, BASF, the world’s largest chemical company, said the low oil prices have caused it to take a $654 million impairment charge on its energy assets, the Wall Street Journal reports.
“Low oil prices are generally anticipated to boost the economy. In the United States, this is not quite happening,” says Lux Research analyst Colleen Kennedy. “Financial analysts are starting to grow concerned that the economy isn’t growing despite low oil prices. Unfortunately, the widespread layoffs will be devastating for many American families and businesses across the country. On the flip side, truck sales have increased and people are actually spending more money on gas.”
A survey of 920 senior oil and gas professionals, conducted by DNV GL, found 73 percent are preparing their company for a sustained period of low oil prices and making cost management an even higher priority in 2016.
The annual outlook for the oil and gas industry found the top three measures executives are prioritizing to impose stricter cost control are: tougher decisions on capex, headcount reductions and increasing pressure on the supply chain.
The ramifications of cheap oil are being felt beyond oil and gas firms, affecting businesses whose major clients are oil companies. Flow control and treatment companies can expect revenue loss in 2016 because of the oil price drop, forecasts the McIlvaine Company. Lux Research’s Kennedy says chemical and water treatment have been hurt by the downturn as well.
“The oilfield chemical market has been hurt significantly during the downturn, which includes companies developing “environmentally friendly” alternatives to widely used oilfield lubricants and drilling fluid additives,” Kennedy says. “Technologies developed that depend on a higher price per barrel, such as treating and recycling produced water on site will also be impacted. Alternative fuels that aren’t cost competitive with oil and gas could also suffer in the short-term.”
On the other hand, specialty chemicals catering to the automotive and construction industries are expected to gain due to lower oil prices, according to Research and Markets.
Another cheap oil winner: logistics and truck transport, says Navigant Research senior research analyst Dexter Gauntlett. “Anything that has to do with transport will see a benefit from lower oil prices,” Gauntlett says.
He adds that despite falling gasoline prices, natural gas and electric vehicle sales aren’t likely to take a hit. Natural gas remains inexpensive and abundant. And consumer demand, coupled with some state-level incentives, will continue to drive EV sales. “I expect natural gas vehicles and electric vehicles will still see growth but maybe not as fast.”
Refiners are benefiting from low oil prices “so companies with technologies that support refineries and downstream operations will benefit as well,” Kennedy says. She points to Rebellion Photonics, which monitors and quantifies real time gas releases and leaks, as an example. “While the technology’s primary purpose is to save money by quickly and accurately identifying leaks, it also has huge implications for monitoring environmental hazards and reducing emissions.”
Photo Credit: oil pumps via Shutterstock