<Putting Peak Oil In Perspective The Oil Drum Foreign deals and domestic refineries>

27 comments on From One of Our Insiders: Some Thoughts and Data about Prices and Exploration

Comments can no longer be added to this story.

| Show without comments | PDF version

Glenn on November 1, 2005 - 4:13pm Permalink | Subthread | Comments top
Shouldn't higher prices for the equipment spur more manufacturing of that equipment - I assume there will be at least a 2-3 year lag in supplying that demand. But as the price of oil goes up, all of the other inputs to retrieving that oil goes up, one of those classic feedback loops. I guess this is where the EROEI rubber hits the road. Since energy is a major factor in energy production, prices will start to increase simply based on their own momentum.
Comments can no longer be added to this story.
Will on November 1, 2005 - 4:31pm Permalink | Subthread | Parent | Comments top
I do not think this is a matter of price stimulating supply for things like pipe and cement, etc... The rapid escalation of fixed project costs means that small projects will never be profitable.

Further, it may mean that medium projects get postponed...

Realistically, who is going to walk into the chairman's office at Exxon and say: "I have a ten year, hundred million dollar project, but I need 90 million to do it..."

Comments can no longer be added to this story.
Glenn on November 1, 2005 - 4:52pm Permalink | Subthread | Parent | Comments top
So in a sense even though the high price has created an incentive to invest more in increasing supply, the base cost of creating that supply is now locked in at a much higher level than ever before.
Comments can no longer be added to this story.
Will on November 1, 2005 - 5:06pm Permalink | Subthread | Parent | Comments top
Exactly.

And this is a profoundly inflationary development.

Comments can no longer be added to this story.
Dan Ur on November 2, 2005 - 3:09am Permalink | Subthread | Parent | Comments top
And thus the Five year out Supply will be going down, Even short term supply will not recover.

If to many Medium sized Production projects don't come on line, We get a sort of peak drop off!  When we are counting the 100's of thousands of barrels and ohhing and ahhing over them, every last drop seems to be very important right about now!!  Look for this to hurt sooner rather than later.

Comments can no longer be added to this story.
LevinK on November 2, 2005 - 11:19pm Permalink | Subthread | Parent | Comments top
In theory - yes. In practice I don't think anyone will invest in producing oil rigs that are unlikely to payoff.

I think this  is actually is good news because it would help level a little bit the decline (with small projects coming later).

Comments can no longer be added to this story.

27 comments on From One of Our Insiders: Some Thoughts and Data about Prices and Exploration

Comments can no longer be added to this story.

| Show without comments | PDF version