Last time it was in the ~$85 dollar range gas was much cheaper.
Posted on 11/03/2014 2:09:43 PM PST by SeekAndFind
Technological advances in hydraulic fracturing have fueled what some call the Great American Shale Boom. Oil and natural gas extracted from shale basins have left the US flush with energy. It's been a boon for US energy-related jobs and equipment suppliers.
But it's not cheap to tap these so-called unconventional plays.
In other words, crashing oil prices will soon make many of these energy sources money-losing projects. Morgan Stanley estimates the average breakeven oil price for these US plays to be about $76 to $77 per barrel. Goldman Sachs puts that number at closer to $75.
If the price of oil can't cover production expenses and these companies are forced to idle their operations, then you could expect spending to drop, jobs to get cut, and delinquencies and defaults to rise.
To make matters more complicated, many of these energy companies are financing their operations by borrowing in the junk-bond market, which means borrowing rates are relatively high.
(Excerpt) Read more at businessinsider.com ...
Last time it was in the ~$85 dollar range gas was much cheaper.
The use of Pa. or Penn. would ease confusion about the use of PA when that often refers to the Palestinian Authoritah.
I’ve seen some (perhaps vaporware?) “modules” described online that can be dropped off/installed to grab the stuff and store it for truck pickup. I’m not sure about the economics, but “free” energy is a definite economic driver.
You’re right, and the NIMBYs are out in force too. But there’s too much money at stake and some sort of export regime is going to happen. On the East Coast, it looks like Cove Point will be the first to open. There are efforts to open one in Philadelphia too, but that is soon to be under the control of Comrade Governor Wolf.
Shame about that too. If Corbett hadn’t implemented the biggest gas tax hike in PA history and given us probably the highest gas prices in the country, he’d cruise to re-election.
The last two gas tax hikes were both under Republicans, Ridge and Corbett. At least with Ridge it was only a nickel increase on what was then $1.33/gallon gas.
The technology exists and is being refined but it costs more than the recovered gas is worth.
As of now it adds to overhead, so if there is no regulatory pressure, most operators are going to continue to vent and flare.
For the record, some reasonable amount of environmental regulation is a good thing. It levels the playing field for the operators and helps the honest and responsible ones compete. Otherwise the field would soon be dominated by bad actors who can out-compete on strictly a cost basis because they don’t care what happens to the waste.
Cheap oil will have the effect of reducing money going to terrorism, and will reduce the ability for one dimansional oil states to keep their populations happy, including Saudi Arabia. For us, some oil companies will go bankrupt, but their assets and technology willl still be available to someone else. Our oil is a long term threat to one dimensional oil contries. Meanwhile, since we are not just an oil producing state, many other industries will gain from lower oil.
Although U.S.-Middle East trade is small (4-5% of total U.S. trade), oil and gas
are key imports, accounting for roughly one-tenth of all oil and gas consumed in the
United States each year.
http://fas.org/sgp/crs/mideast/RL32638.pdf
The above is from the Middle East Free trade progress report.
We win either way
This is reminiscent of Bastiat's "What Is Seen And What Is Unseen" and smacks of cronyism.
Yes, if the price of oil takes a dive there will be job losses in the oil industry.
But they are far offset by the massive increase in purchasing power which reduced oil prices mean for every single American.
Remember pRESIDENT Ebola bowing to the king of saudi arabia, keeper of the holy places? He wasn’t being polite.
LOL, cycles, life’s all about them, but you sure couldn’t tell it by watching the MSM wring their hands...
It pains me greatly to say this, but: you are absolutely correct.
Yes, there are those on FR who insist on confusing the maniacal murdering moslems, and the domestic black savages, with the Amish.
I sure hope you are right.
Logic tells me that the Saudis can produce oil much more cheaply than fracking technology. They also produce light sweet crude which, as I understand, is the most desirable ill to refine.
We need to build more refineries.
d yesterday that China’s response to lower prices was to buy and store more oil.
Doesn’t exactly fit the Saudi plan.
I think the Saudis are bluffing...
First, the production cost of Saudi oil is allegedly $5 or less - which is a number I just simply don’t believe. The Saudis have quietly been modernizing and drilling deeper, because the shallow stuff is not producing as well - some of their fields have had a rapid and somewhat unexpected decline. And deeper equals more cost. I’d bet their true production cost is a lot more than what they advertise.
Second, the way I see it, the huge front end costs on a lot of fracked wells has already been spent. Once that has been done, I suspect the real breakover, which would cause somebody to quit pumping from an established well is much less than $75.
Also, the Saudis need money. Yemen is a mess, ISIS is galavanting around Iraq and Syria...so how does the Saudi Royal family prevent a similar uprising from occurring? Street money. The fear of a populist uprising forces them to share their oil wealth.
So the question is: Can the Saudis afford to sustain sub $75 prices for as long as it takes to pump out all the wells that have already been fracked in the US...and not have a revolt? I don’t think the Saudis want to gamble with that question.
And yesterday I read that China’s response to lower prices was to buy more for storage. Not only does this keep the price up, it also gives China (and the world) more energy independence against any future production cut. So the Saudis may not even have a big payoff, even if they killed US fracking...so its a huge risk with little payoff.
Finally, the Saudis are taking a big risk that the rest of OPEC can afford to make les per barrel, and will happily go along.
We already refine more than we use. There is no refinery shortage.
Yes, our production costs are much less than Morgan Stanley and Goldman Sachs estimate. They are behind the times.
Also, the costs for extraction are dropping rapidly because big dollars are going into technology.
GE did not invest $15 billion into fracking in the last few years for nothing.
It is getting more efficient, cheaper and safer all the time.
This is the USA and nobody can compete with us on productivity if our industries are left unshackled!
Wow, domestically it was at 39 % in 2013 and I am sure that has risen higher in 2014 close to 2015.
I guess it’s a safe bet we are at 50 % or more domestically... Hope the trend continues God willing that the oil fracking industry will find even more ways to cut cost and still make a healthy profiet inspire of the lower $ per barrel.
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