In October, we predicted that one of the reasons why U.S. tight oil production would not collapse in the face of low oil prices is that “when prices slump, so does the demand for all the specialized inputs that oil operations need. Geologists, rigs, roughnecks, all will cut their prices.”
Yesterday, the Financial Times reported that the oil majors were cutting the rates they paid contractors by 10%. An oil services company cut wages for 1,300 workers. And the majors have slashed their internal pay by 15%.
The data comes from the United Kingdom, not the United States, but the same trends apply. We do not expect American tight oil (aka, “shale”) to fall significantly next year.