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Ups and downs remembered

July 13, 2009
TOPICS: OIPA, Crude oil
One year ago, crude oil prices reached a historic high, trading at $147.27.
Roller coaster prices followed the July 11, 2008 benchmark, and last week's 10 percent drop in prices only highlights the volatility of the market.
In a Tulsa World report, OIPA President Mike Terry said the year of ups and downs has made it difficult for oil producers:
So dangerously crazy, in fact, that Oklahoma Independent Petroleum Association President Mike Terry noted that he has seen several members go bankrupt in the past year. Oil hitting $147 a barrel was one thing, but later dropping to $32, then rising past $70 and now dipping to $59.89 is kind of hard to take if you have to make a living at it.
“We’ve never seen this kind of volatility in my lifetime,” Terry said. “It’s unprecedented." ...
Strange days indeed, but that isn’t always a bad thing in Terry’s mind. The OIPA president has seen busts and booms come and go and has gained long-term respect for those companies that hold the bottom line and hang in there.
“They’ve figured a way to manage their company and stay in business regardless of these up-and-down cycles,” Terry said. “They understand that you cannot be highly leveraged if you’re going to survive these downturns.”
Consumer demand will return, he predicted. New technologies for tapping previously inaccessible energy sources, such as shale gas and oil sands, also will keep supplies moving as long as government intervention doesn’t hamper it, Terry added.
Finally, he knows that price volatility hits companies hard and sometimes means layoffs. For those younger industry pros who have known only the boom, Terry believes the past year has been a valuable lesson that may serve them well down the road.
“It’s a hard thing for young people who got in when things were good,” he said. “But now they get to see the dynamics involved in a downturn, see how fragile this thing really is.”
 
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