BAKERSFIELD – Times were tough and crude was cheap, as low as $12 a barrel, when fourth-generation oilman Chad Hathaway started his drilling and production business seven years ago. He had six oil wells and a $5,000 bankroll.
Now prices are in the stratosphere, and fields that once sat idle are being drilled for all they're worth. Hathaway is spending $2.4 million on developing new wells this summer, an expansion that would have been unthinkable before prices soared.
"If it was 2001, no one would consider drilling these wells," he said while driving around his fields northeast of Bakersfield.
This is one of the few places where runaway oil prices are considered good news. Kern County is the oil capital of California and the West. Its vast reservoirs produce more crude each year than Oklahoma and Louisiana combined.
Oil executives here acknowledge that expensive crude is hurting the broader U.S. economy. But it's done wonders for a segment of Kern's economy, creating hundreds of jobs after years of decline and partially cushioning the region against the crash in the housing market. What's more, there's a sense that this is a sustained increase in prices, not a brief spike.
"People are feeling better about things," said David Kilpatrick, a longtime oil executive here and head of independent production company Core Energy LLC. "I remember laying off people in '94 and '95 in this town."
But there's a limit to this boom. Kern's oil fields are old, somewhat worn out and have been producing in decreasing amounts for decades. Price incentives and new technologies can extend the life of mature oil fields but can't stave off the irreversible effects of aging.
At best, Kilpatrick said the rate of decline can be slowed. The same is true with U.S. oil production, which peaked in 1972, he said.
So imports will continue to rise, on a state and national level. Though it's the third-largest oil-producing state, California produces less than 40 percent of the oil it consumes; it gets the rest from Alaska and foreign sources. Some 15 years ago, California produced more than half its oil.
To many here, the solution to the nation's energy shortage is simple: Keep drilling, in Kern and everywhere else. There is considerable support for President Bush's proposal to expand offshore drilling, even as top California officials say no.
Alternate fuels? They're fine, people here say, although they have some doubts about ethanol's worth. As a practical matter, the feeling around Kern is that alternate energy sources are years, if not decades, away from making serious contributions to supply.
"It'll be a long time before we're off oil," said Michael Starzer, president of independent producer Bonanza Creek Energy Operating Co. "It's going to be around for a long time, (and) it's our job to provide it."
Kern has been providing oil since the 1890s and is an industry workhorse. Most of what comes out of the ground here is "heavy" (meaning thick and syrupy) and "sour" (high in sulfur). That makes it less valuable than light, sweet crudes. Last week, Kern crude was selling in the $125 range, at least $15 less than the more glamorous varieties whose prices are routinely quoted on global markets.
The county's landscape is dotted with pump jacks, the gently bobbing machines that pull the crude out of the ground. Most are found in vast, desolate fields operated by major companies like Chevron Corp. But scores of small independents work here, too, operating in orange groves, parking lots and other places overlooked or abandoned by the majors.
"We squeeze for each drop," said Seth Hunter, operations manager at Vaquero Energy. The family-owned company east of Bakersfield produces about 1,100 barrels a day, or 0.2 percent of Kern's total output.
Along with natural gas production – another big business in Kern – energy accounts for about 4 percent of the county's work force. It seems like more.
"More than likely there's a couple of people in your neighborhood who work in the oil industry," said Wes Winkler, an electrical engineer who was pumping gas at $4.54 a gallon at a Bakersfield Mobil station the other day. Still, he said Bakersfield residents are as angry about high prices "as they are anywhere else."
Call The Bee's Dale Kasler, (916) 321-1066.
