The shale oil and gas industry has been a big boost to North America's plastics industry. Resin manufacturing that uses feedstock from shale fields has led to booming business along the Gulf Coast, in Appalachia and in Canada.
But even though production and prices are stable, could shale growth have a limited future?
Neil Mendes, CEO of Fort Worth, Texas-based engineering and material testing firm Alpine Polytech LP, tells Bruce Meyer from our sister paper Rubber News that rising costs — in part due to higher interest rates — and relatively steady global oil and gas prices of about $80 per barrel means some companies may not be willing to make big investments in new drilling sites without the promise of big payoffs.
"If the cost of money is high, and you're drilling for oil, which has traditionally been a $40 to $50 a barrel cost ... and you have to borrow money to do it at a higher [interest] rate, that pushes that cost per barrel of oil into the $60s to produce new oil," Mendes said.
If oil companies can only get $70-$80 for each barrel, that means there's a slimmer profit margin available.
Established shale fields will continue to be in demand, he said, so energy companies likely will focus on those rather than pouring money into new developments.