redbaron

Whither Oil Prices?

Given the facts presented by the author here, it is quite apparent that those that advocate for 'Drill, Drill, Drill', and 'Drill on the US Continental Shelf', i.e., deep water, etc, will have those companies doing so operating at a loss, if oil does actually go to $70.

If these numbers are correct, and the cost of finding oil in deep water is growing at about 10% per year, then the current 2008 cost of finding oil is approaching $76-78, give or take a few dollars (2006 cost was $63.71).

Since looking for oil off the continental US, has not yet been adopted here in the US as an energy policy, and further, given the delay in actual production of perhaps 5-10 years, one can see that for any company to decide to spend billions in off-shore exploration and production now, they must project oil to be at least in the $100 range for the forseeable future.

One can readily see why there might be some reluctance by the oil majors to spend billions, given the authors data and facts presented here. Oil must stay in the $100 range, or Drill, Drill Drill, will not work out profiitably. And if there is no money to be made in Drill, Drill, Drill, who in the right mind will be doing it?

The author is absolutely correct on the premise that no one knows where the price of oil is going, but I prefer to think that it has to stay a little higher than what is commonly projected, or there will be no incentive for anyone to actually Drill, Drill Drill.

Just, IMHO.