Oil rig counts have increased by more than 10% in the past year – and by almost 20% in Texas. The drive to increase domestic oil production has increased the need for trucks to equip and service rigs and, increasingly in Texas, haul the crude from the oilfields to the refineries.
Sam Tibbs, FreightWaves director of data science, estimates that each new rig results in 1.1 million additional truckload miles over the life of the rig. That includes the almost daily hauling of equipment, drilling fluids, sand and water to the rig, as well as transporting the product to refineries until more pipelines can be built.
The latest rotary rig count from Baker Hughes, the industry authority on the matter, found 1,258 rigs operating in North America as of Oct. 12, some 114 more than were in operation one year prior – an increase of 10.3%. Using Tibbs’ estimate, that would translate to 125.4 million additional truckload miles in the past 52 weeks.
Most of the gains came in Texas, where a net 88 of the net 118 new North American rigs were erected, bringing the state’s total to 532. That added an estimated 96.8 million miles of truck hauling to the Lone Star State – the lion’s share of it in the Permian Basin in West Texas, which hosts 489 of the state’s rigs.
Oklahoma and New Mexico were the only other states with more than 100 rigs, hosting 142 (up 18 year over year) and 102 (up 33), respectively. Louisiana had 64 rigs as of Oct. 12, down 1 from the year prior. So, that four-state contiguous corridor lynch-pinned by Texas contains 66.8% of the continent’s new oil production focus.
The U.S. oil boom of the past couple of years – and therefore the rapid rise in oil- and gas-related trucking business – can be credited to a couple of occurrences. First, oil prices recovered from their sudden and steep decline in 2014 and 2015. Though they haven’t returned completely to their lofty pre-bust levels of $100 and more per barrel, they have been as high as $76 per barrel recently and have been above $70 since mid-September.
Second, as Middle Eastern national and other overseas oil producers have reduced production in an effort to raise prices, American oil producers jumped on the chance to fill in the void in supply. They’ve done this by applying technological innovation to unlock vast amounts of oil and natural gas from unconventional shale fields across the nation.
This additional American oil created the demand for more hauling. Jared Flinn, operating partner of the freight board Bulkloads, told FreightWaves that before and after the 2014-2015 oil-price bust, agricultural haulers started shifting over to oil products.
OPEC countries may start increasing production now that West Texas Crude prices are above $70 per barrel, but that remains to be seen. Meanwhile, American truckers, especially in the oil corridor, are enjoying increased business – and increased rates on flatbed lanes – though it has amplified the industry-wide need for drivers.
At the start of this piece, we mentioned that trucks deliver crude from well to refinery, and that is increasingly the case because the primary method of transport, pipeline, is running out of capacity. Oil production in the Permian Basin is now 3.6 million barrels per day, and the pipelines to the Gulf Coast refineries carry only 3.5 million barrels. The overage is being made up by trucks and trains as additional pipelines are being built. But those will not be completed until 2019 at the earliest, and more wells are being drilled in the meantime.
Increased American oil production means increased business for truckers. And because oilfield hauling is oftentimes more dangerous, it often pays more than other loads. With this pay increase comes additional exposure to risk, making the right insurance solution critical to taking advantage of opportunity while mitigating the risk.
Be sure to read our companion article on Oilfield Services Hauling and how we can help tailor a solution for trucking enterprises currently operating in-basin or are looking to expand their authority.