A confluence of conditions, some internal to the oil and gas industry and some far removed from it, are coming together to put substantial upward pricing pressure on one of the most basic industry necessities: oil field tubulars. Ironically, the economics underpinning increased tubular costs parallel the prevailing market fundamentals behind strong energy prices: growing demand, tight supplies and increased production risks. A direct consequence of volatility in the global steel sector is a run-up in prices for oil country tubular goods. The sharp upswing is in stark contrast to the OCTG market environment during much of the past decade, a period that was characterized by oversupply and historically low prices. Average market prices for all tubulars jumped from $720 a ton in June 2003 to $1,058 a ton in June of this year-a 47 percent increase. The figures represent both increased steel costs and new surcharges imposed by the steel industry, chiefly to reflect a lingering worldwide shortage in scrap metal.
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