[DeTomaso] Kinda' NPC: Why does oil cost so much?

Fri Jun 1 08:46:07 EDT 2012

The market _should_ set the price, but it only does so partially.

Too many countries subsidize oil. That distorts the 'market'.
So oil is a commodity... but it isn't.

If you look at the drilling rig market in North America in the last
few months, you'll see a very large percentage of them shifting over
to oil drilling. They were drilling for gas.
New technology (efficient horizontal well drilling, fracturing
techniques, downhole flow control like I'm working on) made going
after stuff like the Bakken, Eagleford, and Barnett shales, etc.
lucrative. It was economic.
They made money.

But now, there's actually a glut of natural gas and the price has
dropped and stayed there.

And something else.... people always say the oil companies make too
much money. After all, look at the billions they made last year.
Well, yeah.... but look at the billions they spent. Their profit
margins actually suck on average.
There are a lot more lucrative businesses out there.

And... the big internationals (usually called IOC's) are under very
heavy pressure from the national oil companies (NOC's). Countries can
now buy the expertise and equipment they need to have their own oil
companies and they keep the IOC's out of the loop. Brazil is a
opposite to this though.... They have realized their own company
Petrobras won't be able to develop the huge offshore fields they've
discovered (Tupi is HUGE!), so they've let other companies in. Even
Norway's state oil company Statoil is in Brazil now. Statoil has all
their oil offshore. They have become experts in deep subsea drilling
and production.
Statoil is in Canada now, too.

I find that grand waves of the hands summing up the 'oil business',
which most people don't know anything about, to be downright wrong and
it misleads others. Because of oil's importance economically and
politically, it is a big stick that is waved around when an excuse is
needed.

Typical BS is the media saying that gas prices will drop if the
government releases stock from the strategic oil reserve. What a bunch
of bull pucky... Take the entire reserve and compare it to the daily
use of the US.
A drop in the bucket.

Anyway, back to designing, testing and selling technology that keeps
oil and gas flowing.
It ain't easy to make a valve that will open and close 500 times with
15,000psi differential across it.
Oh, by the way, you have to do that at 300 degrees F.
If we pull this off, we're shooting for 17,500psi and 340F.
I double dare you to try it.
:-)

Later.
Kirby

On Fri, Jun 1, 2012 at 2:21 AM,  <shawkins777 at comcast.net> wrote:
>
>
> I would disagree, the market should set the price, if it cost more than you want then don't buy it just like anything else.  But most don't want to do that because it may be an inconvenience, let the high price create the incentive for inovation of other forms of energy, not the government because then they will try and use it to control you.
>
>
>
> Steve
>
>
>
> ----- Original Message -----
>
>
> From: "michael at michaelshortt.com" <michaelsavga at gmail.com>
> To: "Kirby Schrader" <kirby.schrader at gmail.com>
> Cc: "Pantera List" <detomaso at realbig.com>
> Sent: Thursday, May 31, 2012 2:23:48 PM
> Subject: Re: [DeTomaso] Kinda' NPC: Why does oil cost so much?
>
> I agree with you in principle. I have always been fascinated with the
> refining process and
> wondered how Gas could be sold cheaper than a gallon of milk as it was
> for over 100 years.
>
> The real problem is that it is treated as a commodity, bought and sold on paper,
> in futures, etc.
>
> The price of 1 gal of regular in 2002 was approx 1.35
> Even as your own chart shows, the 2002-2004 cost per barrel was anywhere from
> 20-30.00
>
> yet, in 2009, when the price fell sharply, the retail price to
> consumers did not follow
> back down to the corresponding retail levels of around 1.50 per gallon.
>
> In my book, that's gouging, plain and simple.
>
> I eggs were a quarter and an egg sandwich cost a 1.00, I understand that,
> if the price of an egg rises to .50, I could see the sandwich costing 1.30,
> but when the eggs drops back drop to a ,25 and you're still charging 1.30,
> you're gouging your customer.
>
> I eschew Socialism, Communism, Marxism, etc., but if ever there was a product
> that needed to have a world council set a price point on the wholesale
> and retail level, gas
> has to be at the top of the list.
>
> Set a cost for the product at every level and leave it alone, keep it
> away from spectulators
> and wall street.
>
> So much of the hoopla and price fluctuations seemed to be based on
> politics and not the cost of
> actually finding it, drilling, getting it out and processed.
>
> Meanwhile, the worldwide "working man" is held hostage.
>
>
> Michael Shortt
>
>
>
>
>
> On Thu, May 31, 2012 at 3:06 PM, Kirby Schrader
> <kirby.schrader at gmail.com> wrote:
>> Needless to say... I wondered whether I should really do this or not,
>> but I'm throwing caution to the wind.
>>
>> I work in the oil industry. I have since 1974. I spent most of the
>> time overseas.
>>
>> Many times, the price of gasoline and why it costs so much comes up on the list.
>> When offshore drilling rigs cost $1,000,000 a day to run and when the
>> easy to get oil is long gone and it's tough to find new reserves, it's
>> easy for the people working in the industry to understand why.
>>
>> But there are other reasons.... Politics, too! Would you believe it?
>>
>> I feel this article sums up the current scenario very well from an
>> investor point of view.
>> You don't have to know anything about the oil business to understand.
>>
>> Thought some of you might appreciate it. Some won't.
>>
>> http://www.caseyresearch.com/cdd/big-oils-cost-revenue-tightrope
>>
>> Now, I will run quickly back into my hole....
>>
>> FWIW,
>> Kirby
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>
> --
>
>
>
>
>
>
>
> Michael L. Shortt
> Savannah, Georgia
> www.michaelshortt.com
> michael at michaelshortt.com
> 912-232-9390
>
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