Posted on 05/22/2015 10:10:17 AM PDT by thackney
Full Title: Cheaper oil isn't such a benefit for US economy anymore as pullbacks in drilling cause damage
If there was one thing most economists agreed on at the start of the year, it was this: Plunging oil prices would boost the U.S. economy.
It hasn't worked out that way.
The economy is thought to have shrunk in the January-March quarter and may barely grow for the first half of 2015 — thanks in part to sharp cuts in energy drilling. And despite their savings at the gas pump, consumers have slowed rather than increased their spending....
So what did they get wrong?
It turns out that the economic effects of lower energy prices have evolved since the Great Recession. Corporate spending on drill rigs, steel piping for wells and railcars to transport oil has become an increasingly vital driver of economic growth. So when oil prices fall and energy companies retrench, the economy suffers....
(Excerpt) Read more at calgaryherald.com ...
A little over $3/gallon, but I buy no ethanol gas. That's about a buck per gallon less, and the way I drive that translates into about $100/month. When I am working steady (in the oil industry as a consultant) $100.00 is a small expense. When I am not, it is $100, if you catch my drift.
Yep... the idea that our country can hurt the oil industry (or any of our countries top 5 industries) and make the economy better is just stupid.
Cheap(er) oil may not be so great for oil companies, but the economy benefits greatly from people having more disposable income in their pockets when they don’t have to spend as much for their gas.
...
The government has FUBAR’d the economy to the point that nothing makes sense anymore, plus journalists are absolutely sure that they know everything.
The difference is when they set up and frack they are almost assured of getting more oil at a fraction of the cost of drilling a new well!!!
It costs me as much to frac a well as it does to drill a well, if I’m drilling a horizontal my frac cost can run as much 10 time higher than my drilling cost depending on the number of stages.
Do you know what fraccing is?
Got a chuckle out of that one myself, some people should read more and comment less.
I tell the grandkids (and the great grands, now) "If you're talking, you aren't listening, and if you aren't listening, you aren't learning. Now stop thinking what you are going to say next for just a second or two and listen."
There are threads I just read and learn, too.
We're drilling the laterals (and the curves and the vertical wells) a lot faster now. Especially since things are getting well enough developed up here that we have a pretty good idea where what is, and we're not feeling our way along watching the gamma ray for navigation quite as much. Before, we were mapping structure with a drill bit.
From when I started doing horizontal wells (1990) we've cut the time to drill one by two thirds, and it is getting faster.
A frac has more or less fixed costs that may come down, but won't go away like they do taking a couple weeks fewer to drill the well.
With the rig count dropping, though, we're entering the heavy competition phase where all the gee whiz stuff gets developed and run (often at reduced costs for the first couple of times just to get it on bottom). It will only get more intense as long as there are rigs drilling.
These are all good reasons for the price to be higher than it should be. I would only urge you to think in terms of the last 9 months though.
What were the prices last November? What were they at the low in February/March? What are they now.
Any factors like the ones you mentioned that were in place in November wouldn’t be the root cause for the price spiking back up now.
Thackney did come up with two good reasons, and you mentioned one of them yourself.
California’s new Global Warming tax $0.10 cents per gallon.
California refineries that have had recent problems affecting the supply, and thus the cost.
Yes, I understand. When you’re not making money $100.00 is a lot more significant than when you are.
What was the low you paid over the last nine months?
You’re paying a little over $3.00 a gallon now from what I understood you to say.
I live maybe an hour or so north of you, and the prices are about $3.20.
Part of it may have to do with the LA Basin.
But as soon as I get away from the west coast it drops considerably.
I have lived in CA for about 35 years now. That chapter is coming to a close as I type.
I am now out of the oil business so I can’t tell you what is happening right now. But my experience is that frequently, if you have a problem in two refineries at the same time, the prices spike. But since they haven’t really spiked that much in my area, I’m not sure what to say.
It does make a big difference that you can’t truck fuel in from out of state; it makes the fluctuations more pronounced and always higher. As soon as you get out of California, the picture is different. So while you blame the oil companies, just remember that they are pumping the oil just an hour from your home. And refining it an hour away. Every other state has gas substantially less, though they have to bring the oil in from great distances and in many cases don’t have a refinery. Same oil companies, same retailers. The difference is Sacramento.
I know. The economy will really take off when gas hits $5/gallon.
These reporters really need to get out more often.
I agree. It’s just that Sacramento was screwed up two years ago and it’s screwed up still.
Outside of the refinery mess and the global warming tax, the other problems are static.
It is interesting that you live in state and are still paying $0.50 cents less per gallon. Ouch!
California has a couple refineries shut down at this time. It matters a lot when you have to bring fuel in from outside area that don't normally produce or stock your blend.
These are not factors in this issue right now. I tried to explain that to you, and you just continued to repeat them as a cause. Do you think I’m unreasoned for calling you on it?
I think you are insulting and uninformed.
It got down to about $2.60 on one fill-up, but that is the no ethanol 91 octane. My late 90s vehicles seem to run better on it, and I get a little better mileage. If you want, (if you haven’t already) check out www.gasbuddy.com and you can check gas prices anywhere.
Just throwing some numbers out here but if the average family uses 1000 gallons of gas a year a 50 cent drop in prices saves them 500 dollars and this is what many claim is the boost in economy or freed up cash. Do they take into consideration the income lost from all those that lost their job’s? Let’s say the average oilfield hand makes 75,000 a year, it would take 150 families to equal that loss in income. Now lets take in a few facts, we have 39 oil producing states with millions of people dependent on the oil and gas business as the primary income source not counting those indirectly effected. We have a total of over 100,000 thousand who have now been laid off in various divisions of the industry, that means 15 million families need to offset that income loss. Keep adding up those that got laid off and it’s obvious the income revenue in total keeps taking a hit. The loss of billions of dollars a year in less overall income does not produce a booming economy.
Yes I know what fracking is...congradulations you are able to read a post and find an error...you must be so proud,
I confess I have been a dismal failure.
I still see fresh reports in the media which call fraccing a drilling technique, and which demonstrate such fundamental misusage of basic terminology they belie a complete ignorance of how oil wells are drilled and completed. That is either the result of 'learning' from people who have no clue, either, or the result of refusing to do basic research.
Those mistakes ring out to people in the industry like someone describing auto repairs to a mechanic which would involve putting the fuel injectors back in the transmission or changing out the turn signal blinker fluid filter.
Sorry to have been so abrupt, but in the interest of intelligent discussion I will continue to call out such errors where I find them.
“Yes I know what fracking is...congradulations you are able to read a post and find an error...you must be so proud,”
The fact that you can’t even spell it makes it hard to believe your comment. There is no K in fracture, but no problem it’s a common mistake made by those with little knowledge of the business.
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