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Oil services firms get squeezed by slowdown

Oil rigs just south of town extract crude for Chevron in Taft, Calif. Schlumberger and Baker Hughes help big oil drill. But their business is softening as some drillers pull back due to the economic slowdown.

Jeremy Hobson: We'll get earnings reports this morning from two huge energy companies: Baker Hughes and Schlumberger. Now those names may not be as well known as companies like BP or Chevron.

But as Marketplace's Mark Garrison reports, they play a key role in oil and gas production.


Mark Garrison: One reason it’s a challenging time for energy companies is obvious. The global economic slowdown means lower oil demand, lower prices, lower profits. So energy companies are choosing to drill only the wells that’ll give the highest returns.

Barbara Shook at the Energy Intelligence Group says they’re looking for easy targets.

Barbara Shook: These probably are gonna be less complicated than some wells that they might have drilled when prices were higher.

And less complicated wells mean less work and less money for oil service companies like Baker Hughes and Schlumberger. Plus, big oil companies are squeezing them for cheaper contracts. It seems like all this might lower your gas prices. Veteran oil industry economist Philip Verleger doesn’t think so.

Philip Verleger: This has almost no impact on the consumer. It’s a transfer of money between the people producing the oil and the contractors that are developing it for the producers.

So don’t expect the savings to get passed on to you.

I'm Mark Garrison for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.

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