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Thursday, April 12, 2012

Oil and Gas Exploration is Driving Truck Sales

Story first appeared in the Detroit Free Press.

The surge in oil and natural-gas exploration is providing a welcome spark for pickup sales, taking up slack from a construction industry that remains in the doldrums.

The flip side of higher gas prices is that energy companies look for more oil, as well as its less expensive derivative, natural gas.

To be sure, a gradually improving economy and pent-up demand are drawing truck customers into the showroom.

Every time we add a number of wells, we add a lease operator - and that requires a truck. According to the vice president of Traverse City-based West Bay Exploration, which has 12 to 14 people operating about 80 wells throughout the state. That includes 43 wells in Jackson County, where oil exploration is booming.  As production increases, you're going to see more wells and more truck sales.  In Michigan that's still a small amount, but in places like Ohio and North Dakota and Pennsylvania, that's significant.

General Motors' full-size pickup sales rose 14% in March compared with a year earlier as the Chevrolet Silverado posted a 12.1% increase and sales of the GMC Sierra jumped 19.2%.

Ford F-Series pickup sales rose 13.6% for the first quarter to 143,827.

Chrysler's Dodge Ram sales were up 23% in March from a year earlier, while Toyota Tundra sales rose 10.3%.

The U.S. Energy Department's Energy Information Administration said in its March energy outlook that crude oil production should increase from 5.6 million barrels per day in 2011 to 5.83 million barrels per day in 2012.

The EIA also said natural gas production reached a new monthly record of 2.577 trillion cubic feet in January, an increase of 11.6% from a year earlier and 16% above January 2009.

It has stabilized around the core customer who really needs a truck, and many of those buyers have been waiting for the economy to recover before replacing their old vehicle.

sales of heavy-duty trucks are particularly strong -- and a lot of that can be attributed to the oil and gas segment. Other industries, including the telecommunications sector, are also stimulating truck demand.

The energy boom has flourished particularly in places like western North Dakota, where unemployment was at a national low of 3.1% in February.

The U.S. oil and gas extraction subsector added about 26,300 jobs from March 2011 to March 2012, according to preliminary estimates by the U.S. Bureau of Labor Statistics. The industry employed about 193,100 last month, including geoscientists, petroleum engineers, pump system operators and wellhead pumpers.

The CEO of the Automobile Dealers Association of North Dakota, said pickups are essential for hauling equipment, pulling trailers, transporting fuel tanks and generators and carrying passengers to drill sites. Currently dealers don't have enough trucks.  The general terrain is rough, and cannot be traversed by a coupe or sedan.  Both the agricultural sector and the oil sector rely heavily on pickup trucks.

Independent oil and natural gas companies have an average of 12 employees and drill about 95% of new wells.

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