Here’s a question. When prices skyrocketed, we were told it the oil companies profit was not a factor because it’s just an add on to the cost per barrel...that the revenue/profit for oil companies were fairly static. Now with the drop in price, we’re seeing huge layoffs. Is it because these are businesses who ‘support’ the drilling, exploration, processing, etc and with the drop in price there is simply less new exploration and processing? That the reward is so small those functions have been reduced?
It is because the amount of drilling is greatly reduced during the time of low oil prices. If you drill only half the number of wells per year, you tend to use half the equipment and labor.