You can thank the selfish greed of E&P CEO's and investors for the high price in the first place, increasing domestic storage, then causing OPEC to do what they did in 2014.
I'd rather have a good steady paycheck and pay a $1 more at the pump then try to figure out what you will do next, or how you will pay for health insurance, or buy groceries, or put shoes on your kids' feet.
Trust me, it could be a lot worse...
The Rock
It's still a struggle for a lot of folks. I know people who are still out of work.
bb, I hear what you're saying. But, hopefully, with the increase in fuel prices you see an increase in economic activity as a whole to offset that. Without it, it's tough.
Because fuel is highly price elastic (consumers react quicker with price fluctuations) it takes longer for other things to catch up. Your customers aren't making the money they need to to offset the price increase you have to do.
JTV - bring it on! I'd love to see the rig count go up. High fuel price is because of a lower oil supply. We have it, problem is, labor in the USA isn't cheap. It takes a higher oil price to produce and refine domestically, ergo, a higher price at the pump as well. E&P companies need to learn to operate at a stable price point like the power utility has to. $70/bbl would likely be that point and make things predictable long term.
Shuteye, I'm not retired yet, but on a fixed income as well.
But what do I know, just my opinion and it ain't even worth $.02.
BTW, if it is their oil any free market person should say that they can choose to sell or not sell it as they wish.
A stable price would do more good than harm.
The lowered cost if production is the building and placing of infrastructure (gathering stations, tank batteries, pipelines). Before that, a lot of the oil was being trucked, enter the variable of high fuel cost we have been discussing.
At one point, gas got up to over $5.00/gal in California. It's still near $3.00 now. Blows my mind when I see a bunch of 1 ton 4x4 trucks at the grocery store in the summer. What a waste.
It's rough though, when a truck is a must for work and a lot of you guys have no way out of that. Still though, my brother is a general contractor and my dad is a subcontractor and they've both gone the same way and have a heavy truck and a commuter. So many times, bids, repairs, running around, you just don't need the big truck.
If we could decrease our consumption in this country, we could give the middle finger to the Middle East for good. A year or two of us not buying any of their oil and they'd be begging us to buy it for $10/gal.
Why not increase our production? It is so much easier than decreasing consumption. One thing that was proven during the oil glut is that we can ramp up production WAY faster than the "20 years before it makes a difference" mantra that liberals have used my whole life. Not only did US production increase significantly in a short time, it did this with basically no help from a government that was downright oppressive to fossil fuels.
Hasn't Iran increased their production?
That increase was on what is called fee/fee which is private surface/private minerals, or fee/state. Only state regulatory agencies are involved and makes it easier to get things done.
I don't think I'd export any. What I would export is the surplus of NG. That could be globally traded for something else.
I put full blame on the regulatory federal gov't and deep pocket/greedy CEO's. The company I used to work for has one of those...
bb - very good point. That will in turn decrease some feed price, and consequently save on some food expense with us stretching our dollar a little further.
Here's how oil & gas exploration companies work. They look at seismic data and production trends in the area where they have rights and are looking to drill. When a promising area is found, they estimate the costs to drill the well, develop the facilities & pipelines to produce the well and also estimate the reserves to cover their investment. Those economics are based on the current price of oil & futures at that point in time. In the times where oil is approx. $70/ BBL or more, the US oil & gas industry is booming. The companies accumulate debt during increased drilling and development periods. the companies don't recoup their investment overnight. It takes anywhere from 2 to 5 years to actually profit from a well depending on various factors.
When the price goes down to current levels, the companies carry that debt and are unable to pay it off. They don't spend money on development and the production rates begin to fall off. The lower production rates and the lower prices are a double edge sword that adds to the debt. This is especially true in the shale plays throughout the US.
When the the price per BBL is trading over $90, the oil & gas companies start making the obscene profits that people hear about. Even then, those companies are accumulating debt based on economics at that time. The contractors that support the oil & gas companies during the good times are raising their rates, the price of steel and materials is high, etc. So it's a vicious cycle.
The rag heads in the ME are the biggest enemy of the US from energy independence standpoint. Throw in a liberal administration whose created crippling regulations and you have a recipe for disaster in the O&G industry.
With cheap oil & gas prices during the last 2 years ask yourselves why the economy isn't going gangbusters? Why hasn't the cost of consumables that are transported daily gone down?
Didn't mean to go on a rant here. All most people know about oil & gas is that its in the pump every time they stop to fill up. I hope this help some at least understand what's happening to the industry right now and how it works. That's just the Upstream side of the O&G business. There's Midstream and Downstream as well. Each operates on a different set of rules.
As far as cost recovery, like he said, it depends on what the product price is today and tomorrow along with NPV calcs and production declines to know what the payout of the well is. A cyclic price and boom/bust cycles that seem to occur every ten years makes this difficult.
One thing, hopefully, that could happen is refiners (downstream) could retrofit their facilities to refine our domestic crude and recover that cost quickly by buying the oil in storage cheaper. Then you'll see oil prices increase and stabilize more long term. Approval of LNG facility permits (sitting on the desk of the POTUS) would greatly benefit the natural gas industry as well.
Even though I was not asked, my opinion is we will see an increase in activity in the near term as in mid to late 2017. The BLM for public lands has just implemented a change in the Offshore Orders that hinder O&G operations so it is things like this that will need to be navigated through first. I do not believe it will be overnight.
First, what they'll gain with a price increase, they'll lose in revenue because they'll be selling less.
Second, and most important, is that this will create an increase our domestic production, creating more jobs and making us even more energy independent.
Moreover, OPEC must be freaking out with the latest discovery in Texas, which is reported to the second largest oil discovery ever.
Also...for those of you in the O&G industry I understand completely your concern but what is the percentage of people that are economically tied to the O&G industry booming in the US? I am assuming it is less than the people who's lives are negatively effected by higher oil prices. Hence....more people will see $4 gas as a negative than a positive. Areas where incomes are depressed, even when the cost of living is also low, are really hit the hardest. If 20% of a guys income is expendable and he make $5K a month it is much easier for him to absorb a utility cost doubling vs. a guy who has the same percentage of expendable income on $3K/ month.
As far as the "new" discovery in the Wolfcamp in TX, what that really is is that the reserves in place now have the recovery ability it never had before based on the proven new completion methods. But, to pay for that technology, you have to have a price of at least $60 to make it worth while, along with risking your investment properly. Cost of gov't regulation is yuge. That needs to go away first.
I say let interstate commerce work as intended and put a leash and muzzle on the wacko's protesting pipelines.
It's also important to realize that it's not just Chevron, Shell & Exxon out in the gulf and on land. There are numerous other independent oil & gas companies that don't have the deep pockets or resources that the big players do. They are the ones that are going out of business.
I like the lower fuel prices just like everyone else does, but those prices are unsustainable and eventually higher prices will come back. That cycle has played over and over since the 70's.
I will be the first to recognize as a proponent of the oil and gas industry that the industry has done this to themselves with price/revenue problems and national perception. Drain the swamp and lose some of the "old school" mentality.
These protestors are just that. Their Civil Rights are not being infringed on.
JTV - I'd wager 0bamacare has had a larger impact for the most part. The main reason I was so quick to go back to work (in power plant generation now, blah!) was to reduce health insurance expense. $1000 per month and it wasn't even a great plan. Now that I have experienced that, I have a better idea of what I'm getting into when (X) I start a business next year. Also, you do have to live within your means. I've had to adjust and will agian if necessary...
Can you imagine what will happen when the corporate tax rate is reduced to 15%?
1. Why isn't the US economy going gangbusters right now? 2. Why hasn't the cost of goods and consumables gone down?
Government regulation is probably the second greatest factor impacting energy prices, only possible running behind the cost of acquisition and production.
The real culprit was, as usual, Democrats in Congress and the White House who required home loan institutions to give mortgages to people with little or no assets, little or no credit and therefore little or no chance of being able to pay back the loan.
But hey! Everyone one is 'entitled' to own a home. right? I mean, that's only 'fair,' right?
Spot on Kyle. The Clinton administration set the stage for the housing bubble. The bubble popped when Bush was President.
Interesting discussion for sure. Being in the construction industry Oil and gas dictates that. I am curious how trump in office will change things. As our nation's need for more electricity will increase. I wonder if it will be in coal or.....
Do you know if there is a book that took up where "The Prize" left off?
Since 2008, the World economy has been stagnant and I think that the oversupply that we are seeing is result of less demand. At some point that will change. Rates will go down, demand will increase and prices will go up. The vicious cycle will continue. I didn't make the rules....
Trump campaigned to put coal workers back to work.
My question is: when do we start? And prefer to not relocate with the ability to work from home...
I pay 55.4 cents per gallon of local, state, and federal taxes. Take that away and my gas price is $1.55/gallon. If they dropped their rate by a combined 50% it would leave profit margins larger, allowing a more stable market for employees and employers. But, they aren't going to do that as they are a disease. You can blame OPEC. However, the problem is our government and local municipalities. God Bless men
As far as gasoline prices, yes, the gov't has way too high a tax imposed to keep people from consuming "too much"...
Ike,
We aren't running out of oil anytime soon. Matter of fact, I don't think it is possible. I don't believe what we have always been told about oil and I believe it is produced from the core of the Earth. I believe the science given to us daily on fossil fuels is similar to the same junk science we were given for global warming. Many scientists from other countries laugh at our general consensus that oil is non renewable.
Regardless....oil is being discovered constantly and the most recent large discovery in Texas is said to have enough oil to be the sole supplier for the US for almost 3 years. Thats just one oil field.
On another point made, Main stream Science say's fossil fuels aren't renewable but, claims that layers of sedimentation formed it. Kinda backwards and contradicting. Science says topsoil takes thousands of years to produce. Really? I can make it in a couple months. Etc.... I agree with Ike that we need to be responsible but, totally disagree with anyone that says we are not being by aggressively utilizing the resources this earth provide's. God Bless men
Texas Tea
A massive deposit of untapped hydrocarbon deposits, thought to be the largest ever in the United States has been discovered in Texas. The Midland Basin of the Wolfcamp shale area contains an estimated 20 billion barrels of oil and 1.6 billion barrels of natural gas, the US Geological Survey said on 15 November...
This is one of the primary reason's why Trump was able to cross traditional party lines and win.
A lot of people finally saw the complete bullsh*t in the old lie of the Democrats being the party of the "working" man.....as long as you aren't in the coal, building or oil/gas industry to name a few.
