Federal Reserve’s actions may spur oil demand increase


Oil prices are going up after efforts were made to spur economic growth

In an effort to spur economic turnaround, the Federal Reserve implemented a number of measures to improve the country's financial condition. As a result, the price of oil rose on Thursday afternoon.

The Fed announced that it will spend roughly $40 billion each month to buy mortaged-back securities. The intention is to lower long-term investment rates and increase borrowing and spending. Meanwhile, short-term interest rates – which are already at a record-low – will be kept that way through at least 2015.

The expectation is that these measures will lead to an increase of oil consumption because money spending activities require energy. In anticipation for this event, the price of benchmark crude rose above $98.

Jason Schenker, president of Austin-based energy consultancy firm Prestige Economics LLC, spoke with Bloomberg about the effects of the Fed's announcement.

"The market's been incredibly volatile since the Fed release," Schenker said.

If these actions are successful in reversing the direction of the economy, oil consumption should increase. More spending requires more energy consumption – cars will be on the road longer, more businesses will open and technology will evolve. This will put an enormous amount of pressure on oilfield producers to ensure that they can extract oil quickly and efficiently.

One way to accomplish this is with the use of an artificial lift, which can help companies withdraw oil at a faster rate. The country's economic future depends on oilfield producers' ability to get oil to the masses as quick as possible and, if they cannot do so the actions taken by the Fed may be wasted. Companies looking to improve their extraction efforts should contact an oilfield technology consultant.