What A Federal Default Would Mean For The Oil Industry

Just over a week remains before the federal government is expected to reach its borrowing limit. What can the oil and gas drillers expect if the debt ceiling isn't raised in time?

If the federal government fails to raise its borrowing limit and begins to default on its debts, the U.S. economy steers into uncharted waters. One very real possibility, though, is that credit markets will seize up, much as they did during the financial crisis of 2008.

That would cause problems even for major energy companies with large cash reserves. But for smaller companies, it would be devastating. John Van Schaik is New York bureau chief for the Energy Intelligence Group.

“With everything then frozen, they won’t be able to get any capital. They won’t be able to buy the products they need — the metal they need, the sand they need, the chemicals they need — to even go out in the fields and produce, let alone grow their production and continue the oil boom that the U.S. has gotten used to.”

Van Schaik says that even if such a disruption of financial markets lasts for only a few days, it would take much longer to undo the damage to the energy sector.

Bio photo of Andrew Schneider

Andrew Schneider

Business Reporter

Andrew Schneider joined KUHF in January 2011, after more than a decade as a print reporter for The Kiplinger Letter...