Thursday, June 12, 2008

Why Oil Prices Will Tank

CNN/Forune

20 comments:

Anonymous said...

I just don't believe it. I won't believe it.
I can't believe it. I shan't believe it.
R.R.

David said...

The cure for high oil prices, is, well, high oil prices! At some point supply and demand go back into balance...that could be $200 a bbl, tho I seriously doubt that the correct number will once again be $50 a bbl. That number depends, in part, on the cost of alternative fuels. If $4 a gallon gas based on crude oil is too expensive, then there needs to be a viable alternative fuel for powering motor vehicles that can be reliably made in large quantities and readily used in common vehicles for less than that, say $3 a gallon. To the extent that this economically viable alternative fuel is available, the price of crude will tend to decline as well. But for now at least the alternatives are at least as costly to make as gasoline from crude, can't be produced in any meaningful quantities, cant be burned in vehicles people currently own, or a combination of all of the above.

In time, and with enough research on alternative fuels some of this could get worked out, but probably not very fast.

MEANWHILE, EOG still says that their direct drilling and recovery cost for a bbl of crude in the Parshall Bakken is running $20-$22 a bbl. On a a recovery cost per bbl basis, parts of Mountrail county may have some of the least expensive crude oil on the planet. With crude at $135, the economic incentive to drill more holes in Mountrail county is enormous. The companies involved all know that. That is why what is happening is happening.

The farmers up there are starting to figure this out too, I think. Over the years, not a lot of positive economic things have happened in northwest North Dakota, and many of the locals up there still seem to have a rather gloomy general outlook on life. It's always interesting to listen to these Parshall people tell the stories of their economic misery and hardship, a really tough world in which survival depends on sheer grit and hard work. Many up there still seem to believe that not anything has changed for the better. We will see!

Anonymous said...

I guess it depends on the definition of tank. There is no question that high prices will spur alternatives and as energy rich as this country is that is all good. New high paying jobs and less money in the pockets of middle east countries that don't like us.

It would not be surprising to see prices back at 60 to 80 per barrell but that will not stop the changes that are coming and we can all still make money.

Hey lets put a windmill on every well site. Then all you ND folks can double dip on the energy crisis. If you are growing corn, well...........

dkwilk said...

when you look at the presentations put out by different corporations on the drilling economies of the Bakken they are using $ 70.00-to $ 90.00 dollars for there projected rates of return.. I realize part of this is to protect the compay from investor lawsuits, and also the need a number to base finanical decisions on..
I think at some time in the future oil will return to below $ 100 per barrell. , partly because of conservation, of new production and pratially because of ALL markets it seems swing to far on the pendulium.. OIL was to Cheap, now to EXPENSE.. JMHO.. don

Larry said...

Prior to 1970 oil was $3 barrel. From 1970 to 1980 it spiked to $40 barrel. From 1980 to 2000 oil averaged about $20 barrel.

Now oil has moved from $20 barrel to $135 barrel. We do not know if $135 is the top or not. But whatever the top ends up being, the long term price following this current price spike should be around (top price-$20/2) or about $60 if $135 is the top.

Throughout the world today's new oilfields are being developed under the assumption oil prices will be around $60 and the wells will payout in 5 years or less. These new oilfields will have an economic life of 20 years or so.

Anonymous said...

What happens if we we get a direct hit with another monster hurricane on the oilfields in the gulf area, or some kind military actions against Iran for their attempts to build nuclear weapons? I think we would see 150 - 175 dollar a barrel oil overnight. In China they are selling up to 20,000 new cars a week. I don't see oil ever hitting 60 dollars a barrel ever again, maybe in a dream.

Anonymous said...

I JUST HEARD THAT THE CATHOLIC CHURCH OWENS ALL THE MINERALS TO THAT AWSOME WELL THAT WAS JUST FINISHED IN DUNN COUNTY BY PEAK.

THIS HAS TO BE THE BEST NEWS/WELL EVER. GREAT JOB TO ALL!!

Anonymous said...

I have a pesonal interest in the Parshall oil field and have been doing a scrapbook on our farm and the area. Can anyone tell me apx. how many wells have have been drilled and are pumping in the last year in that area and apx. how many rigs are up in the area now? Much appreciated. Thanks.

Larry said...

Anon--
Your general question is best answered by referring you to a couple of websites maintained by the NDIC.

First site is the NDIC map--
https://www.dmr.nd.gov/oilgas/
Click on GIS Map Server and zoom into the Parshall area.

Next site is the Well Search--
https://www.dmr.nd.gov/oilgas/findwellsvw.asp

Put in the township and range and that will give you the wells permitted and/or drilled. Parshall Township is 152-90, Model Township is 152-89, Wayzetta is 153-90, Shell Township is 153-89.

Since it appears you may be a genealogist, do you know the origins for the Wayzetta Township name?

Anonymous said...

This week the chief of one of Russia's largest producers, Gazprom predicted $250/BBL in the forseeable future, 2009 timeframe...

U.S. Navy is doing future fleet planning based on $230/BBL...

For the price to go down, the U.S. dollar has to strengthen and oil demand has to weaken, significantly. Is this likely? China, what do you think???

Anonymous said...

No I do not know the geneaogist of Wayzetta township. Do you??? I know very little on all this but find it so intersting. Thanks for sharing the web site I will check it out.

Anonymous said...

Saw somewhere buried in this site something about a company that represents EOG in leasing land.
Can someone in the know tell me who that is.
Trying to spread the wealth.

Anonymous said...

Has anyone heard if the pipe line is up and running in the Wyzetta township/Mountrial County yet? Or anywhere in that area?

Anonymous said...

Anonymous looking for EOG contact.
Not sure if this is what you are looking for, but this person was a huge help to me with EOG stuff. Try Nick Lambert out of Dickenson, ND. 701-483-1581. Good luck!

Anonymous said...

David, you to awesome photos, but have several of your photos but havev several of them listed wrong on who the owenrs are. The one you have lised as the Risan for instants is the VERY first well drilled in the Mountrail/Wyzetta area and that is called the Parshall well or to most of us from the area the Baker well. I hope you can go back and find the right names/owners on all your photos. Great shots thought!!!!

david said...

let me know if there are other errors and I will correct them..

Larry said...

Anonymous who asked---
"about a company that represents EOG in leasing land."

Contex Energy is the company and you can reach them in Dickinson at 701-225-5507

Anonymous said...

Thanks Larry !!

Anonymous said...

Using history as a model for the future of the oil market is fundamentally flawed for one key reason: Dwindling supply. No matter how much we drill, there is no way that supply will ever be in synch with demand again, barring a global depression.

Oil will never magically revert to pre-'spike' prices, until and unless demand drops by a huge margin, such as can only be achieved through the magic of fusion power, war, or depression

Just my (inflation adjusted) 3 cents.

joe petrol said...

" I don't see oil ever hitting 60 dollars a barrel ever again, maybe in a dream."

So, any of you wise men want to explain this $35 a barrel oil in 2009?