Oil Services Cost to Increase 15.9%... And This is NOT TRANSITORY!
Oilfield service pricing levels for drilling equipment and services are anticipated to increase approximately 15.9% globally over the next 12 months due to inflationary costs and to drive net pricing gains for oilfield service providers. Regional variances are observed with North American land anticipating prices to increase approximately 20.9% over the next 12 months while international land is projected to increase 9.8% and offshore by 11.6%.
Price increases are observed to be highest in North American land due to higher costs of labor, material, and transportation coupled with increased drilling of nearly 40% versus the prior year straining all aspects of the supply chain. It is important to highlight that North America land also experienced the largest declines in pricing in 2020 during the covid market downturn with price declines of 14.8%.
While the US Administration may choose to ignore the obvious cost inflation signals and energy fundamentals, oil and gas operators are aware of the cost inflation realities with 98% of North American operators expecting to see prices increase over the next 12 months.
Despite having over 100 years of abundant, affordable, and accessible energy supplies the world economies are now struggling with energy scarcity, risk of power outages, and energy security concerns. The pragmatic reality remains that oil and gas demand will continue to increase over the next ten years and additional investment in the industry will be required to meet the global demand.
Until rational minds begin to address the supply side of the economic equation, inflationary pressures will persist until demand is squashed most likely via continued interest rate hikes being used as blunt instruments to push the global economy into a hard reset/recession.
Kimberlite will continue to track price trends and operator expenditure plans and report updates. Feel free to reach out to discuss.