Reply to $7/gallon gas is coming

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[quote=Anonymous][quote=Anonymous][twitter]https://twitter.com/Acyn/status/1501973289937563650?s=20&t=HuBMXKHEEw5EynU5o5Wurg[/twitter][/quote]

About a dozen or so pages back I was lectured for pointing out the problem here, but I’ll try again:

1.  Drilling for oil is a technically complex operation. You’re trying to extract a molecule thousands of feet beneath the surface of the earth. You’re drilling into asymmetric geological formations. Those formations will determine the success of your venture. You can’t actually put your eyes on the molecule until it is extracted.  There is a reason why Petroleum engineers are amongst the best paid on the planet.

2.  Drilling for oil is a capital intensive business. Most of your costs are upfront before you start to collect revenue. The economics on any particular well are typically based on 30+ years of production from that well.  Investing in a new well is inherently a very long term commitment.

3.  Even under ideal circumstances, assuming you have a lease to drill on, first planning to first production takes about 180 days. Typically, it is much longer. Presently, it would be even longer due to labor and supply shortages.

4.  EVEN BEFORE COVID, the oil business in North America was going through a historic reorganization with record bankruptcies filed. COVID further supercharged the process. Numerous big time investors flat out declared they would never invest in the space again. Politicians all over the globe have stated a desire to phase out oil sometime between 2030 to 2050.

5.  EVEN BEFORE RUSSIA ATTACKED UKRAINE, the price of oil was steadily marching upward as demand was outstripping market forecasts. Just like COVID accelerated what was already a badly declining price environment, Russia’s actions accelerated what was a badly increasing price environment.

Now, a bunch of politicians who as recently as three weeks ago were openly cheering on/trying to legislate the end of the oil industry, have a SHORT term problem. They want oil companies to deploy expensive LONG term solutions to solve the problem.       I don’t know what the solution is and there are probably a thousand more wrinkles to this problem I’ve left out from this post. [/quote]

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