The price of oil dipped below $37 a barrel on Thursday. CBC News asked oilpatch veteran Jim Gray what is driving the price down. 

Gray got his start in the industry in 1956 when oil was $1.35 a barrel. Over time, he established Canadian Hunter Exploration as one of the country's most successful natural gas producers. He's been a fixture of the industry for decades and is considered a kind of sage elder for an industry that is once again reeling from hard times.

A volatile combination of factors is dragging prices down, including persistent oversupply and OPEC's decision to hold the course on production levels. But Gray says a more fundamental shift is at hand.

This interview with Gray has been edited and condensed.

Q: What makes this time any different than the other times the price of oil has fallen?

I've been in the business a long time and I've seen lots of reversals. But all the reversals prior to this one, going right back to the 1970s, had one common characteristic and that was they were all based on vertical technology. They were all based on vertical wells. Starting in the 1980s, the industry tried what we called going around the corner, in other words, drilling horizontal wells. The industry finally figured it out down in the U.S. in about 2005-2006. Then they combined that with multi-stage fracking. In other words

[in] this reversal, the fundamental driver is horizontal technology. I think there is a reordering of production going on. I don't think we're going to have any quick recovery out of this one. I mean there's been "V [-shaped] recoveries," there's been "U [-shaped] recoveries," but that's all been vertical technology. This is horizontal technology. This is a new world out there. 
Oil and gas pump jack

In this reversal, the fundamental driver is horizontal drilling technology, which has replaced the vertical drilling, Jim Gray says. (Sue Ogrocki/Associated Press)

Q: How long can the North American producers hold on at these low prices?

It does cost quite a bit to get it out of the ground. But our costs are plummeting as you can imagine they would. At $100 US oil you have one set of costs, at $38/barrel you have a whole different set of costs. So those costs are coming down rather dramatically. But don't think those costs that we were bandying about in our industry six months ago are the costs we're dealing with today. They've come down, everything is coming down — the amount we pay consultants, the amount it costs to prepare a rig. I mean, there must be 500 different places you spend money when you're going to drill a well, from trucks to bulldozers to rigs to everything. The cost of everything has come down. We were living in a super-inflated world at $100/barrel. People didn't argue about costs, they argued about availability. "I don't care what it costs, can you do this frack job?" Well, you know what happens to costs in that environment.

Q: How low will the price of oil go this time?

I don't know how low it's going to go. When I was 30 I knew, when I was 60, I wasn't so sure and now that I'm over 80, I know damned well I don't know and neither does anyone else. But it can't be sustained at $30 a barrel. There's just too much production. It keeps on gradually increasing at 1-2 per cent a year. It can't sustain. So it will recover, but could it go down to $30? Sure. It's a whole new world, and I find it very exciting because, you know, with crises and challenges come opportunities. Where are they? I don't know. If I was 20, I'd be working my ass off to figure it out, but I'm not. But there are going to be opportunities. At $100 a barrel it's pretty hard to invest and make money. At $40 a barrel or $30 a barrel and if you can convince yourself that's simply not sustainable, then of course. They're called contrarian investors. It's a risky world but there will be a lot of money made.

Q: When did you start in the business?

Back as a summer student in the late 1950s

Q: Did I read this right, that oil at one point was still $5 a barrel?

I can remember oil at $1.35 a barrel. And we drilled wells and we built pipelines and we built plants and we did everything. It seems incomprehensible now. 

Author's note: And that's well worth remembering here. Oilpatch veterans including Gray built empires when prices were a fraction of what they are today. He's convinced another, younger version of himself is out there waiting to build on whatever the industry has in store now.

The oil industry was built on wild price swings. It was never a business for the faint of heart. Gray's convinced the industry will find its footing, but that it will take someone with steely nerves to figure out how and when to make a play in this new world of drilling.