Texas oil boom creates surplus of crude

It is no secret that Texas is one of the handful of states that is home to an oil boom. According to an article on U.S. News & World Report, the state's oil production reached 3 million barrels per day in May and may hit 3.4 million barrels per day later this year. That would be 1 million more barrels than Texas produced only one year ago.

This high level of production has presented the state with impressive economic growth, but that hasn't been its only effect. In fact, a recent article on the Houston Chronicle's Fuel Fix blog notes that production is so high in Texas—particularly in the Midland area—that local prices are actually lower than the national average.

U.S. crude oil prices—which are benchmarked at $96.48 per barrel—were about $19 per barrel higher than the prices in Midland when trading opened Tuesday morning. Both prices are lower than those of international Brent crude, set at $101.56 per barrel.

The reason Midland's oil is so comparatively cheap is because supplies have reached such high levels that they have actually hit a bottleneck in the transportation system, leading to an increased backlog of oil. If allowed to continue, this could have a deleterious effect on production levels in the future.

"For exploration and production companies, they're not going to receive as high a price for their Midland crude in the third quarter. It could hinder cash flows for those that aren't already hedged for the back half of the year," Jeff Dietert, managing director of Simmons & Co. International, told the news source. 

It's time for the manufacturing industry to step up production to ensure that the crude oil transportation system has what it needs to function. CNC machine shops have an important role to play in this process.