The recent drop in crude prices won’t kill off the US shale oil industry. It’ll just make it more efficient.

    Profit margins and break-even points are relative not only to the price of oil, but also to the cost of doing business. As oil prices drop, producers will undoubtedly renegotiate their ludicrously expensive oil service contracts, slash wages for their workforce and cut perks to bring their costs in line with the depressed price for crude. The demand for oil remains strong, which should provide an adequate floor for producers in the long run, but only after they get their finances in order.

    How oil prices ever reached $100 a barrel still remains a mystery to many who have followed the industry for years. But the 40% drop in oil prices over the past six months has been shocking for oil bears and bulls alike. Why on earth did it fall so hard, so fast? There is plenty of speculation, ranging from the Saudi’s wish to “crush” the U.S. shale industry, to the U.S. colluding with the Saudi’s to flood the market in order to bankrupt an aggressive Russia and an obstinate Iran.

    Conspiracy theories aside, the fact is oil prices have dropped and they may stay “low” for a while. This has analysts, journalists, and pundits running around claiming that it’s the end of the world.

    It is understandable that people are nervous. After all, the oil industry is a major producer of jobs and wealth for the U.S. It contributes around $1.2 trillion to U.S. GDP and supports over 9.3 million permanent jobs, according to a study from The Perryman Group. Not all that money and jobs come directly from the shale oil industry or even the energy industry as a whole but instead derive from the multiplier effect the industry has on local economies. Given this, it’s clear why any drop in the oil price, let alone a 40% drop, is cause for concern.

    Nowhere in the U.S. is that concern felt more acutely than in Houston, Texas, the nation’s oil capital. The falling price of crude hasn’t had a major impact on the city’s economy, at least not yet. But people, especially the under-40 crowd—the Shale Boomers, as I call them—are starting to grow very worried. At bars and restaurants in Houston’s newly gentrified East End and Midtown districts, you often hear the young bucks (and does) comparing notes on their company’s break-even points with respect to oil prices. Those who work for producers with large acreage in the Bakken shale in North Dakota are saying West Texas Intermediate (WTI) crude needs to stay above $60 a barrel for their companies to stay in the black. Those who work for producers with large acreage in the Eagleford shale play in south Texas say their companies can stay above water with oil as low as $45 to $50 a barrel.

    Both groups say that they have heard their companies are starting to walk away from some of the more “speculative” parts of their fields, which translates to a decrease in production, the first such decrease in years. This was confirmed Wednesday when the Fed’s Beige Book noted that oil and gas activity in North Dakota decreased in early November due to the rapid fall in oil prices. Nevertheless, the Fed added the outlook from “officials” in North Dakota “remained optimistic,” and that they expect oil production to continue to increase over the next two years.

    What are these “officials,” thinking? Don’t they worry about the break-even price of oil? Sure they do, but unlike the Shale Boomers, they also probably remember drilling for oil when it traded in the single digits, which really wasn’t that long ago. For these seasoned oil men, crude at $60 a barrel still looks mighty appealing.

    Doug Sheridan, the founder of EnergyPoint Research, which conducts satisfaction surveys, ratings, and reports for the energy industry, recalls when he had lunch with an oil executive of a major energy giant 10 years ago who confided in him that his firm was worried that oil prices had risen too high, too fast. “He was concerned that the high prices would attract negative attention from the press and Congress,” Sheridan told Fortune. “The funny thing was, oil prices were only around $33 a barrel.”

    最近的石油价格下跌不会将美国页岩油行业置于死地，而只会让它变得更有效率。

    利润率和盈亏平衡点不仅仅和油价有关，还取决于经营成本。随着油价下跌，生产企业必将重新商讨那些贵得离谱的油田服务合同，降低员工工资并削减津贴，以便让成本和下跌的油价保持一致。对石油的需求依然旺盛，这将为石油开采企业提供足够的长期支撑，但后者必须首先理顺自身的财务状况。

    对许多长年跟踪石油行业的人来说，油价如何攀升到每桶100美元仍然是个谜。而过去六个月中油价下跌了40%，同样让看涨和看跌的人都感到惊讶。石油价格究竟为什么会跌得如此之猛？如此之快？人们有各种各样的猜测，从沙特想“摧毁”美国的页岩油行业，到美国和沙特联手制造供给泛滥，目的是让咄咄逼人的俄罗斯和顽固不化的伊朗陷入破产境地，不一而足。

    让我们先把阴谋论放在一边，实际情况是油价已经下跌，而且可能在一段时间内保持在“较低”水平。这种局面让分析师、记者和评论人士四处宣称世界末日到了。

    人们的紧张可以理解。毕竟，石油行业是美国就业机会和财富的主要来源。经济分析机构The Perryman Group的研究显示，石油行业为美国贡献了1.2万亿美元GDP和930多万个长期就业机会。这些GDP和就业机会并非直接由页岩油行业创造，甚至不是整个能源行业，而是该行业给地方经济带来的乘数效应所产生的。想到这一点，就明白为什么油价的每次下跌都会造成紧张空气了，更别说跌幅达到了40%。

    德克萨斯州休斯敦市是美国的石油之都，在这里最能感受到这种紧张气氛。油价持续下滑尚未对这座城市的经济产生重大影响，至少目前还没有。但这里的人们已经变得非常焦虑，特别是那些40岁以下的人，我把这个群体称为“页岩油婴儿潮一代”。在休斯敦新兴的中产阶层社区East End和Midtown的酒吧和餐馆里，经常能听到小伙子（和姑娘）们探讨自己所在公司的盈亏平衡点和油价的关联。在北达科他州巴肯拥有大片页岩油田的采油公司的员工们认为，西德州轻质低硫原油（WTI）价格需保持在每桶60美元以上，他们的公司才能继续盈利。而那些在南德州Eagleford拥有大量页岩油业务的石油公司的员工们则表示，油价下跌到不低于45-50美元时，他们的公司能安然无恙。

    这两个群体都表示，他们已经听说自己的公司开始撤出油田中“投机性”较高的区域，也就是说这些公司的石油产量出现了多年来的首次下降。美联储（Fed）周三公布的褐皮书印证了这一点。该报告指出，由于油价迅速下跌，11月初石油和天然气公司在北达科他州的经营活动减少。不过，美联储补充道，该地区“高层”对前景“保持乐观”，他们预计今后两年石油产量将继续上升。

    这些“高层”在想什么？难道他们不担心盈亏平衡价格吗？当然担心，但和“页岩油婴儿潮一代”不同的是，他们可能还记得油价处于个位数时开采石油的情形，而这其实并不是那么久远。对这些经验丰富的石油人来说，每桶60美元的油价仍有极大的吸引力。

    从事能源行业满意度调查，评级和分析的EnergyPoint Research公司的创始人道格•谢里丹回忆说，10年前他曾和一家能源巨头的石油业务主管共进午餐，后者向他透露，他们公司担心油价涨得太高太快。谢里丹告诉《财富》（Fortune）杂志：“他害怕高油价会引起媒体和国会的关注，从而产生不利影响。可笑的是，那时候油价只有33美元左右。”

    The shale boom has perpetuated the notion that drilling for oil, especially in shale formations, is somehow super complicated and expensive. It really isn’t. Fracking a well involves just shooting a bunch of water and chemicals down a hole at high pressure—not exactly rocket science. The drilling technique has been around since the 1940s, and the energy industry has gotten very good at doing it over the decades. Recent advances in technology, such as horizontal drilling, have made fracking wells even easier and more efficient.

    But even though drilling for oil has become easier and more efficient, production costs have gone through the roof. Why? There are a few reasons for this, but the main one is the high price of oil. When oil service firms like Halliburton and Schlumberger negotiate contracts with producers, they usually take the oil price into consideration. The higher the oil price, the higher the cost for their services. This, combined with the boom in cheap credit over the last few years, has increased demand for everything related to the oil service sector—from men to material to housing. In what other industry do you know where someone without a college degree can start out making six figures for doing manual labor? You can in the oil and gas sectors, especially in places like Western North Dakota. There, McDonald’s employees make $20 an hour and rent for a modest place can top $2,000 a month.

    But as the oil price drops, so will costs, bringing the “break-even” price down with it. Seasoned oil men know how to get this done—it involves a little Texas theater, which is sort of like bargaining at a Turkish bazaar. The producers will first clutch their hearts and tell their suppliers that they simply cannot afford to drill any more given the sharp slump in oil prices. Their suppliers will offer a slight discount on their services but the producer will say he’s “walking away.” This is where we are in the negotiating cycle.

    After letting the oil service firms sweat a bit (traditionally around two to four months), a producer will give their former suppliers a call, saying they are “thinking” of getting back in the game. Desperate for work, the suppliers will now be willing to renegotiate a whole new agreement based on a lower oil price. The aim of the new contract is to give producers close to the same margin they had when prices were much higher. Profits are restored and everyone is happy.

    This negotiation will happen across all parts of the oil and gas cost structure. So welders who were making $135,000 a year will probably see a pay cut, while the administrative staff back at headquarters will probably miss out on that fat bonus check they have come to rely on. Rig workers and engineers will see their pay and benefits slashed as well. Anyone who complains will be sent to Alaska or somewhere even worse than Western North Dakota in the winter, like Siberia (seriously). And as with any bursting bubble, asset prices will start to fall for everything from oil leases to jack-up rigs to townhouses in Houston. Oh, and that McDonald’s employee in Western North Dakota will probably need to settle for $15 an hour.

    But oil production will continue, that is, until prices reach a point at which it truly makes no sense for anyone to drill anywhere.

    So, what is the absolute lowest price oil can be produced for in the U.S.? Consider this—fracking last boomed in the U.S. back in the mid-1980s, when a barrel of oil fetched around $23. That is equivalent to around $50 a barrel today, when adjusted for inflation. That fracking boom went bust after prices fell to around $8 a barrel, which is worth around $18 in today’s money. With oil last week hitting $63 a barrel, it seems that prices have a lot more room to fall before things get really scary.