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Oil Production - 2/18/15

Though lower oil prices are generally viewed favorably by many economic actors, this is less likely to be the case in oil producing states like Texas and North Dakota.  For several months, oil industry and other analysts have been predicting major reductions in investment related to oil production.  Those predictions may turn out to be true, but to date there is little evidence that oil-related investment is collapsing according to Bloomberg. 

Investment in drilling rigs and wells actually improved during the final months of 2014.  According to the most recent report on gross domestic product from the Bureau of Economic Analysis, spending for rigs and wells expanded at a 9 percent annualized pace during the fourth quarter after rising 8 percent the prior quarter.  Spending on oilfield machinery is more challenging to establish, because these figures are encompassed in the government’s other equipment category. 

The Bureau of Economic Analysis reports spending on equipment like drill pipes and bits with machinery used by agriculture, construction and other industries.  The point is that these data also do not indicate a precipitous decline in oil production-related capital spending.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.