Commercial or Owner Operator Truck Insurance Texas: Recent Fracking Surge Could Fuel a Big Trucking Surge

Hydraulic fracturing or fracking made a dramatic entrance into the national and international scene between 2009 and 2014. During these years, the United States became the world’s top oil producer. It also created a huge demand for trucking to haul sand, water, equipment, drilling fluids, and other materials.

OPEC responded to this challenge by flooding the market with oil to drive down oil prices below the break-even price for doing fracking profitably. The intent was to bankrupt the fracking industry and rid OPEC of the competition. This tactic did suppress U.S. fracking, but at the same time, it stimulated innovation within the industry to operate more efficiently. As a result, fracking can now produce oil at profit at prices higher than $50 per barrel. This is down from $75 per barrel in 2014.

However, this oil over-supply tactic inflicted economic harm on Saudi Arabia to the point that it and OPEC started cutting back on oil production to raise oil prices in November 2016. Because of this, oil prices have risen to the new break-even point of $50 per barrel for fracking. As a result, the industry is seeing a resurgence.

Whether this continues depends on OPEC’s ability to drive up oil prices. Saudi Arabia in particular, needs higher oil prices to balance its budget and therefore has a strong incentive. If oil prices continue to rise, the fracking resurgence will continue. This would be good news for the trucking industry because the demand for trucking to haul sand, water, equipment, drilling fluids, and to make fuel deliveries will continue as well.

Will the good times of the first fracking boom return? Making predictions on the price of oil is difficult. But if OPEC stays the course with its oil cutback, and the fracking industry itself doesn’t produce an oil glut that drops prices, and world demand for oil remains healthy, then it’s very possible.

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David Ott

David Ott