Shale Production Slows as Oil Rigs Go Inactive
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What immediate consumer and market trends open this Money Briefing?
Here's your money briefing. I'm J.R. Whalen at The Wall Street Journal in New York. The number of oil rigs that are offline in the U.S. sounds like industry jargon, but it's actually an important part of the equation related to what consumers pay. We'll check in with a Journal Energy reporter in a moment. First, some money and market news you should know. If there's any uncertainty about the economy, it's not being felt by consumers as they walk to the checkout counter. Economists still feel the effects of slower growth overseas, and trade skirmishes represent dark clouds on the horizon. But the Census Bureau says in June, American shoppers increased their spending and factories ramped up production.
Americans picked up their spending online, up 13.4% from a year ago. and they spend heavily at clothing stores, restaurants, and building material supply stores. And it may come as no surprise that sales of plant-based burgers are rising, but what may be surprising is that a 10% jump in sales is thanks to meat eaters. The market research company NPD Group reports that vegans and vegetarians no doubt have been part of the growth of plant-based burgers, But people who eat meat are bigger contributors to sales as they look to increase the amount of plant-based foods in their diet. NPD's research says that 95% of plant-based buyers have made a beef burger purchase within the last year. Now, beef burgers are still the top sandwich ordered at U.S.
restaurants, but growth is flat compared to last year. And in trying plant-based burgers, NPD group says that meat lovers still get the burger experience, but without giving up protein and they also remain attentive to social concerns.
We often talk about oil prices here on Your Money Briefing, which are up 30% year to date. But we don't often talk about the number of oil rigs in operation. And that's an important part of the equation.
How are U.S. consumer spending patterns and plant-based burger sales changing?
Journal Energy reporter Stephanie Yang is here to explain why the number of active rigs has fallen substantially and why that's important. So Stephanie, let's start with why the rig count has fallen to a 17-month low.
Yeah, so this has kind of been happening gradually over, you know, this year and also, you know, into the year before. And that's because we've seen oil companies really start to cut back on what they're targeting in terms of production growth. And that's coming from, you know, investor pressure because they've been, you know, with these companies for years and all they've seen is production growth but is really lacking in return. So now the companies are shifting their tune and pulling back.
And this is because shale companies, they also can't attract investment. And that seems counterintuitive because shale has been the hottest thing in the oil market for years.
Right. Yeah. And so for years, it was the case that everyone really wanted to get in on this rush. You know, I previously mentioned they just weren't seeing the returns come back from that. So it just ended up starting not to look as much as attractive of an investment to people unless they were willing to prioritize, you know, returning cash to shareholders.
They raised less than $400 million this year by selling new shares. That compares with $6.5 billion last year. So a substantial drawdown, as you were saying. And even if shale drillers wanted to ramp up production and try to slow down the pace at which oil prices have risen, they couldn't.
So I guess technically they could go in that direction. It doesn't seem like it's a direction that anyone really wants to go in now, particularly because if they're not raising money through equity, they would have to turn to debt markets. And they actually are looking into more nontraditional means of financing. But I think generally they also don't want to be taking on more debt since that has been a strategy over the past few years that hasn't quite panned out the way they want it to.
And there are those who watch the industry who say that supply is expected to outpace demand next year in terms of shale.
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