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March 2015 SEE Monthly Brief
Who is Hurt and Who Benefits from the Oil Price Drop?

This monthly summary comes from a recent wide-ranging SEE talk about the harms and benefits of the 50% drop in oil price. Clearly oil producers and oil service providers have been hurt. But other, ancillary effects on natural gas prices and petrochemicals competitiveness are just now becoming more obvious. Companies and groups that are hurt by the oil price drop include:
  • Anything serving high-cost shale plays like the Tuscaloosa Marine Shale in MS-AL, Uinta in Utah, and Mississippi Lime in OK
  • Gas to liquids plant (SASOL plant in Louisiana cancelled)
  • LNG priced to oil (proposed US LNG plants and gas producers)
  • Oil producers
  • Transporters as suppliers (pipelines can't lock in increased use)
  • Steel companies supplying pipe
  • Pressure pumpers
  • Sand producers---anything specialized or high-cost (like specialty proppant)
  • Anyone supplying oilfield services, training, housing, infrastructure, restaurants & hotels (Karnes County, Midland, etc.)
  • Ethylene producers (like Dow) no longer competitively advantaged vs. foreign companies that use oil to make ethylene&= petrochemicals
  • Alternative energy producers that depend on comparison to high oil/gasoline prices to be economically attractive
  • Texas government (starting 2017) and its Rainy Day Fund, U-Texas system; other oil states
  • OPEC and other oil producers (Mexico & Canada)
  • Other oil countries including Russia
Companies and groups that are helped by the oil price drop are:
  • Gasoline consumers (approximately a $125 billion windfall in the U.S., compared to 2013 spending on gasoline of $370 billion, according to Goldman Sachs)
  • Airlines
  • Refiners
  • Truckers (for both diesel costs and for hiring)
  • Restaurants and retailers
  • Anyone to whom we sell petroleum products abroad
  • Traders that make money on volatility
  • China
  • Our balance of trade (lower import bill)
  • Oil storage owners, including tankers at sea: anyone who can make money on a time trade with physical storage; at present, about 445 million barrels of oil in storage in the U.S.
  • New, cheaper technology or technology that saves money: example—refracking

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           Copyright 2015, Starks Energy Economics, LLC. This information is confidential and is intended only for the individual named. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Starks Energy Economics, LLC. This communication is based on information which Starks Energy Economics, LLC believes is reliable. However, Starks Energy Economics, LLC does not represent or warrant its accuracy. This communication should not be considered as an offer or solicitation to buy or sell any securities.

           I, Laura Starks, do hereby certify that, to the best of my knowledge, the views and opinions in this research report accurately reflect my personal views about the companies and their securities as of the date of this report. These viewpoints and opinions may be subject to change without notice and Starks Energy Economics, LLC will not be responsible for any consequences associated with reliance on any statement or opinion contained in this communication. No Starks Energy Economics, LLC consultant or analyst has nor will receive direct or indirect compensation in return for expressing specific recommendations or viewpoints in this report.

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