reply to post by StellarX
You don't think that a 540,000 daily drop is significiant? Even if you put their production costs at
$75 a barrel
(high end) it's costing them $27,000,000 in revenue a day if they
can sell it at $125 a barrel. Don't you think that's enough incentive to look for more oil, or are they happy watching their profits dwindle away
at a rate of 34% a year? If it's cheaper to have a 34% net net loss every year than to find new oil, then new oil must be really hard to find.
You're just proving my point for me.
Take you're other scenario that it's cheaper to sell less oil for more. Let's take their peak in 2003 of about 3 million barrels a day. Oil was at
about $30 a barrel which would give them a revenue of $90,000,000 a day. Currently they're selling 2.05 mil a day at $140 which puts them at
$287,000,000. So in that regard you're correct. But if they production continues to slide as it currently is then next year they'll only make $179
million a day, then $115 million the year after that. Of course that's unless the prices continues to rise as quickly as their decline.
Either way, eventually they'll cease to have any oil to export and it won't matter what the price is. They can't make money if they don't have any
oil to sell. Of course you're assuming that the price will stay high. What if it drops to $40 a barrel? They'll be running out of oil with half the
revenue that they currently have. The fact is that it's better for them to explore and find oil now with higher prices. The fact that they can't
replace what they're producing says that the oil isn't there. They're currently making more money now than they ever did so what's the hold-up?
You're stating that it's cheaper to just sit on dwindling profits like an old man counting the years till death. As a business plan that's
Nobuo Tanaka, Executive Director of the International Energy Agency (IEA) said today in Madrid ...that market fundamentals were the main underlying
factor behind high oil prices. “OPEC production is at record highs and non-OPEC producers are working at full throttle, but stocks show no
unusual build. These factors demonstrate that it is mainly fundamentals pushing up the price,"
Even if everyone was stockpiling oil (which they're not) it's not a sustainable plan. Eventually you'll fill every drum, bucket, and thimble with
oil and will have no where else to put it. If you bought it at $140 and saved it you would lose your shirt and the farm when you ran out of storage
room and had to let the oil actually hit the market. What would you do then? The market would then be flooded with oil which would lower the prices
ensuring that you loose money? You can't hold on to the oil forever.
To refute your claim that oil production is not in decline, continue reading what Mr. Tanaka, the head of the IEA, states at the same press
Project delays averaging 12 months, coupled with global average decline of 5.2% - up from 4% last year – are the factors behind these
revisions. Over 3.5 mb/d of new production will be needed each year just to hold global production steady. “Our findings highlight again the
need for sustained, and indeed, increased investment both upstream and downstream -- to assure that the market is adequately supplied,” stated Mr.
He states quite clearly that the world needs to start 3.5 mb/d of new production every year just to keep the supply flat. So even if high prices are
keeping demand down, we still have an issue with declining fields like the Cantarell for example. The U.S. has peaked and is declining since the
1970s. The U.K.s North Sea field has peaked and is in decline. Mexico has peaked, Russia has peaked (Look it up) and yes even Saudi Arabia appears to
“Khurais and [offshore field] Manifa are the last two giants in Saudi Arabia,” says Sadad al-Husseini, a former Aramco vice president for oil
exploration. “Sure, we will discover dozens of other smaller fields, but after these, we are chasing after smaller and smaller fish.”
costs for adding new oil production have quadrupled in recent years, from $4,000 for each new barrel per day of capacity to about $16,000 for each
The fact is, the big fields are in decline, and the new fields are much smaller and harder to find and produce. Personally I would love to see gas go
back to being under .80 cents a gallon. Remember this scene from the original movie Die Hard? Those were the days but I just don't see the market
going that way.
(Not for dial-up)
[edit on 11-7-2008 by dbates]