27 comments on From One of Our Insiders: Some Thoughts and Data about Prices and Exploration
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27 comments on From One of Our Insiders: Some Thoughts and Data about Prices and Exploration
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As far as "companies [being] convinced that the price will stay above their threshold number", I would think that it is obvious that the price will stay above their threshold numbers at this point. There is simply no evidence in the supply & demand equation that market prices will ever go down again much below current levels -- unless there is a serious worldwide recession. There's no Prudhoe Bay, no North Sea to bring online anymore. Pretty soon you're getting 1/mbd from marginal projects? When will they decide to go forward with these projects? Apparently, higher initial development costs are putting them off given the historical volatility of the market but I would submit that past experience does not apply here. Not to mention, as you have, that these oil business cultures are very conservative and risk-averse.
A good example is the oil shock of 1973 that reduced supply by 5% and increased prices by 100%. 1980 increased prices by 400% and was the result of an even smaller decrease in production.