Business: Booming Times for Driilers

A rush to dig for energy after oil and gas prices are deregulated

Giant semitrailer trucks groaning under loads of heavy oil-drilling equipment churn up dust on the dirt roads of Evanston, Wyo. On the high buttes surrounding the town, tall trapezoidal rigs often push drilling bits 15,000 ft. and more into the earth in search of oil and natural gas. More than 100 wells are already in operation in the area, some of them pumping oil from directly beneath Main Street.

Scenes similar to the one in Evanston are now being played out in such other Wyoming towns as Rock Springs, Green River and Baggs, as the U.S. heads toward the greatest drilling surge in its history. During the first six months of this year, 34.9% more oil wells were completed than in the same period of 1979. Some 3,000 drilling rigs are in operation, the most in 25 years. The Oil & Gas Journal predicts that U.S. drillers will complete 59,107 wells this year, surpassing the old record of 58,160 that was set in 1956.

The search for more domestic energy comes at a time when Saudi Arabia, the U.S.'s principal foreign supplier of crude, is once again showing its clout in world oil. That country last week paid an estimated $2 billion to buy the remaining 40% of Aramco, which produces the bulk of Saudi oil, from a consortium of four American oil producers, Exxon, Mobil, Texaco and Standard Oil of California. Americans will continue working for Aramco, but only in technical and managerial roles. The kingdom's Oil Minister, Sheik Ahmed Zaki Yamani, is also reported to have told British Foreign Secretary Lord Carrington that Saudi Arabia would soon reduce oil production. Although Yamani did not specify the amount of the cutback, he has previously indicated it might be from the current 9.5 million bbl. per day to 8.5 million bbl. per day. For about a year, the Saudis have kept their petroleum output high in an attempt to hold down world energy prices. So far, their efforts have been successful; world crude inventories are at record levels. Any Saudi cutback would likely mean some tightening of world oil supplies and somewhat higher prices for gasoline and heating oil.

The drilling boom in the U.S. is yet another demonstration of an old economic law: when prices rise, producers will attempt to increase their output. In 1978 Congress began phasing out price controls on natural gas, and in 1979 the Government started a gradual decontrol of crude-oil prices. The cost of oil and gas immediately increased, but the initial production results are impressive. U.S. oil output will rise by 2% this year, from 8.5 million bbl. per day to 8.7 million bbl.—marking only the third increase in a decade. The additions to natural-gas reserves grew by 35% last year, the largest jump in twelve years.