Here's What The Fed's Industry Contacts Are Saying About The Oil Crash

There's a lot of commentary from Fed contacts in both energy and oil-related services about the freefalling price of the commodity over the last month.

The takeaway seems to be that the economy isn't yet seeing much response to the falling price of oil, but everyone is on the lookout for it. Drilling activity certainly doesn't seem to be slowing.

Here are the most interesting tidbits (also one bonus about natural gas supply):

• "Several Districts cited the decline in the price of oil over the reporting period and its effects on gasoline and diesel fuel prices. However, transportation costs rose in some Districts where capacity constraints were an issue."
• Boston Fed: "One firm in the chemical industry cites falling oil prices as a problem because chemicals are produced in the United States using natural gas whereas in the rest of the world, they are produced using oil."
• Atlanta Fed: "Industry contacts reported that the recent drop in oil prices led regional exploration and production firms to evaluate operational flexibility, cost- management strategies, and extraction technologies, although steady production is anticipated in both deepwater and onshore drilling. Contacts also shared that the supply of natural gas continued to grow faster than demand even after adjusting for seasonal factors."
• Minneapolis Fed: "Activity in the energy sector was steady, but mining activity rose since the previous report. In early November, oil and gas exploration activity decreased in North Dakota and increased in Montana relative to a month earlier; production remained at record levels. Despite recent declines in oil prices, officials in North Dakota expect oil production to continue increasing over the next two years."
• Kansas City Fed: "Most contacts continued to report a high level of drilling activity, and active oil and gas rigs rose through early November, particularly for natural gas. Respondents remained optimistic about future drilling but were closely monitoring the price of oil, which was close to many firms' breakeven price."
• Dallas Fed: "Work related to mergers and acquisitions picked up, while demand for legal services from oil and gas companies slowed in response to increased uncertainty regarding future oil prices ... contacts [in financial services] whose clients are in oil and gas production said they expect a possible slowdown in business because of declining oil prices."
• More Dallas Fed: "Growth in Texas drilling activity was concentrated in the Permian Basin in West Texas; drilling activity outside of the Permian Basin was little changed. Outlooks for next year, though still positive, were less optimistic than in the prior report, and contacts said that budgets were being revised and capital expenditures are expected to decline in response to lower oil prices."