Despite boom, higher costs push Big Oil into slump

Fuel Fix ^ | August 2, 2013 | Associated Press

[thackney]

Exxon Mobil, Shell and BP all posted disappointing earnings this week. Chevron is expected to post a profit decline Friday. All of them face the same problem: The cost to get newfound oil from remote locations and tightly packed rock is high and rising. And it takes years and billions of dollars to get big new production projects up and running.

The higher extraction costs could translate to higher oil and gasoline prices for consumers.

Strong production growth at an oil company can offset higher operating costs, “but when production is flat or declining it’s a big hit,” says Brian Youngberg, an analyst at Edward Jones. “Even though oil prices are $100 or higher, the returns on investment aren’t what they used to be.”

The new oil being found and produced is in ultra-deep ocean waters, in sands that must be heated to release the hydrocarbons, or trapped in shale or other tight rock that requires constant drilling to keep production steady.

That makes this new oil far more expensive to get out of the ground than what’s known as conventional oil — large pools of oil and gas in relatively easy-to-drill locations. Those reserves have always been hard to find, but now they are all but gone outside of the Middle East.

[thackney]

Excerpted for AP content...

[mountainlion]

I think the costs of development of oil is insignificant next to the cost of doing business with the Goberment. Permit fees, taxes, EPA regulations, Anti fracking groups are all driving costs up. OPEC is running scared of the US oil and at war with our economy.

[Parmy]

Another problem is speculation and speculators. It should be mandatory that a speculator be required to take possession of the product of intended speculation.

That would curb the multiple sales of the same product before delivery that increases the speculators price, which in the case of oil creates a false price and false economy.