Another lefty claim is that ‘big oil’ has many wells that are proven, but capped, sitting on them while the price goes ever upward. Thoughts?
And then there’s the claim that the companies aren’t maintaining their refineries, letting them go, and not building new ones, to keep the price of refined goods up.
Sounds like balderdash to me.
Oil companies don’t make money leaving oil in the ground.
If it is owned by a major oil company, it is either flowing or so new the pipeline is a year away to complete then it flows.
Some old stripper wells producing maybe 2 barrels a day get capped when the price falls. When the price climbs and the drill rigs get busy, you cannot justify tying up a rig to rework an oil well for a few barrels a day versus a new well producing hundreds to maybe even thousands a day at first.
The only wells left capped are the uneconomic ones.
There are plenty of wells that are capped, typically because the yield has dropped off as the oil was depleted. It's not economical to continue trying to pump out the oil at the reduced flow rate. The equipment could be moved to someplace else more productive. Or even if it was left in place, the equipment has to be maintained.
If the price gets high enough, then it can become economical to restart production on marginal oil wells. There's no conspiracy -- it's just supply and demand. What is the point of spending $110 to pump out a barrel of oil that you can only sell for $100?
If the price goes to $120, you can make a profit. However, are you sure that the price will stay at or above $120? Or, will it drop again before you can get production started? Think about it, and you'll understand why it's a risky bet.
A lot of the solar boondoggles (like Solyendra) are because Chinese imports reduced the market price per kilowatt to a point where US manufactures can't compete. And, one of the reasons that solar power is still a niche market is because the cost of producing power is STILL more than just buying it from your local electric utility.
If either of these factors were reversed, there would be a huge market for solar panels, and manufacturers would be cranking up the production lines. But, if you were to apply the same leftist analogy: solar panel manufacturers are holding them off the market to inflate the prices.
One last thing to consider: so many people think that "big oil" is making obscene amounts of money. But, they only consider revenues, and not the costs. What is the actual profit margin? You can get the information here:
That has an entry for a lot of different industries involved in resource recovery. The net profit margin for "Major Integrated Oil and Gas" (like Exxon, BP, etc.) is 7.9%. Compare that to this:
You can click on the header entry for Net Profit Margin and sort by profit margin. Look around and you'll see that a 7.9% profit margin is not outrageous. You can even check individual companies. Check out:
Compare those to Apple, Inc. -- which has a 28.20% profit margin.
Just for grins, check the "Semiconductor - Specialized" industry under the "Technology" sector. You'll find most of the well-known names in the solar panel business in that category. Their profit margins will explain why it's a horrible investment at this time.
This takes all of the industries in each of the sectors, and combines them into one chart. You can sort by Net Profit Margin, and see where your favorite industry fits into the list.
Don't forget to consider the market capitalization. You'll find some industries near the top, but with very small market capitalization, relative to other industries.