Posted on 03/07/2022 3:52:02 AM PST by TigerLikesRoosterNew
How fracking could cushion oil price shocks
by University of Pennsylvania
Fracking, or the extraction of oil and gas from shale rock formations, is suddenly more attractive with the surge in oil prices fueled by Russia's invasion of Ukraine. The conflict threatens disruption of natural gas flows from Ukraine to Europe, while oil companies with interests in Russia could be caught in the crossfire of sanctions by the U.S. and European countries. A recent research paper by experts at Wharton and elsewhere titled "A World Equilibrium Model of the Oil Market" makes the business case for fracking as a viable mitigating factor to soften the impact of oil and gas price shocks.
New investment in oil fields is typically demand-driven, and not driven by supply shocks such as those that could occur with the Russia-Ukraine conflict, according to Wharton finance professor Gideon Bornstein, who co-authored the paper with Stockholm University economics professor Per Krusell and Northwestern University finance professor Sergio Rebelo. He did not expect conventional oil firms to invest in new oil fields as a response to the "short-term" supply shocks resulting from the conflict.
"Investment in oil is very volatile," said Bornstein, adding that it increases when oil prices are high and falls when they are low. "But we also saw in our data that it is very hard for conventional, non-fracking oil fields to change the amount of oil they [can extract] in the short run. To get more oil out from the ground, you either need to increase the extraction rate from your existing fields, which is very hard to adjust [to market changes], or you have to invest in more oil fields or more oil wells." It takes an average of 12 years after the initial investment for new oil fields to begin producing,he added.
(Excerpt) Read more at phys.org ...
$110 Oil Prompts Private Shale Firms To Open The Taps
OilPrice.com ^ | 3/6/2022 | Irna Slav
https://freerepublic.com/focus/f-chat/4044393/posts
The major players are not planning to increase production as they see this situation as temporary. They have to remain fiscally disciplined in order to answer to their shareholders (insert angry and dumbfounded face here).
What is temporary to them? 3 months, 6 months, a few weeks, 3 years?
The demoncrats are intentionally destroying America, because of white privilege, colonialism, racism or some other BS tiny dick energy lie. They aren’t going to lift a finger to stop the pain.
Well when you add literally millions of barrels per day of domestic production that foreign countries cannot interrupt.....gee.....that’s going to have an effect on price.
Derp.
"low intensity war of attrition" WTF? The ruskys only kill 2-300 people a day?
Did you read your screed before you posted it?
Didn’t know that. Thanks!
This has got to be one of the most ridiculously stupid articles I’ve ever read. Please give us the name of the man you claim is a fracing expert because his claim is as ridiculous as the author of the article.
On the average, how many Ukrainians do you think Russians are killing per day? I suspect they are not as many as you think.
Before they make any investments they’re going to wait for the market to stabilize and see where they are. Nothing like having the price of crude go crashing down before you can TD a well. We seen that happen. Oil made a major drop after Bush declared he was opening Anwar back up. Speculators and producers watched oil take about a 50 dollar a barrel drop in about a week. Speculators who purchased 140 dollar oil from the Mideast watched as oil plummeted as their tankers were on the water. Nothing like watching a tanker with a million barrels of 140 dollar oil drop to less than 100 before you get to the ports and unload. Let’s see if the prices hold and then we’ll see a major uptick in new production.
“”It takes an average of 12 years after the initial investment for new oil fields to begin producing, he added.””
Watched High Peak move into Howard county, do the seismic and start drilling and producing in less than 2 years. That’s just another BS claim.
You are correct.
But the question remains regarding the timeline. We have also seen this go the other way with everyone putting drilling off for YEARS. And it is always the same excuse, the cost of investment. And that comes from what is a very volatile market no matter when that need or investment comes.
What would the United States need to do to stabilize our own market and what is our base needs? Of course we cannot answer that question because the democrats are all about this ‘green energy’ boondoggle. Which at this point is taking longer than it would take to drill/frack the oil. Energy security is a huge concern, no it is a requirement. And we need to do both and/or have multiple sources. Unfortunately both sides are too narrowly focused on one thing.
Energy stabilization is needed in the years to come as a national security measure. Just as the wise individual plans for his/her family, our nation needs to plan to stop being impacted by the foolishness of oligarchs. Trump knew this.
Hate to tell the author but I don’t know of a single well drilled in the last 50 years that hasn’t been fracked, that technology is almost a 100 years old. The big part of the increased production with new wells is the drilling technology. In conventional vertical drilling they drill down to the desired zone and frac that zone. With horizontals they drill and turn until they’re actually drilling down the zone and they might go 5,00-7500 ft or longer. Then they frac all along that zone. You can have up to as many as 50+ different fracs. One horizontal can do the work of 20 to 30 conventional rigs. It’s not the frac itself it’s the number of fracs per well.
“But the question remains regarding the timeline. We have also seen this go the other way with everyone putting drilling off for YEARS.”
Supply, demand and cost determines that. If an oil producers is not drilling it’s because there’s no money to be made at the time or it’s to high risk. You don’t stay in the oil business very long with out continued drilling. A well doesn’t just continue to flow at peak output like it did initially, they fall off in production rather quickly on some cases. The horizontals are especially guilty of this. Not everybody’s costs are the same and that’s another player. We have a very unique position in this. we own the ranch, both surface and minerals. We handle all of the operations with the exception of drilling which we contract out. We don’t pay leasing fee’s, damages and we don’t pay royalties which can be as high as 25-40 percent of your production cost. When oil was a 27.50 most of the big producers were shutting in well simply because it cost more to operate than they we making. We were still making money at the time. We’re not the only exception, there’s many reasons ones cost can vary from another.
“”What would the United States need to do to stabilize our own market “”
Nothing! Absolutely nothing. All we need is for the House, the Senate and the Administration to do is sit down, shut up and leave us alone. Those of us in the oil and gas business will take care of the rest.
So was I.
Isn’t most of the drilling risk taken by the smaller/wildcat type drillers?
They are willing to risk drilling when the big guys are much more conservative?
Please feel free to enlighten me/us we Freepers.
Most all the oil is pretty well known now, wildcatting is a fading business. What’s needed is stability in the market before long term investments are looked at. Example. Everybody knew the Cline Shale was here in West Texas, problem was the cost of retrieving it. With horizontals and multi stage fracing it finally became profitable. Conventional vertical rigs, single stage fracing into such a tight zone didn’t pay much.
I have no idea and sure as hell can't trust any 'reporting' from the TV talking heads.
In a country as big as Texas with 40 plus million people being bombed, shot, beaten and starved I'm not sure that anyone really knows the number.
I give the Ukrainians a load of credit, I'm not sure that US citizens would do the same.
I think the days of "Red Dawn" are history.
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