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93 comments on A Nice Counterexample

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Mad Oilman on October 1, 2005 - 3:40am

That graph is interesting. Unfortunately, it does not account for the huge tax increases on the oil industry introduced by the Chancellor of the Exchequer two or three years ago. With a lingering threat of windfall profits taxes.

Those additional taxes made the UK, already a high priced exploration and production market (due to the environmental and regulatory climate) a difficult place to justify investment dollars. Big oil investment dollars go to the lowest risk/reward regions of the world. That is why offshore West Africa has exploded in production the last 5 years. Biggest bang for the buck.

Norway's depletion can be viewed in the same way. It is by far the most restrictive place to drill on the planet. We know where the oil and gas is. It is currently not economically viable, given the restrictions in Norway, to drill there.

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Stuart Staniford on October 1, 2005 - 3:18pm

West Africa is one notch short of a war zone. It's a place no rational business person would set up shop without an incredibly good reason. The "risk" part of the "risk/reward" tradeoff is obviously huge (as in Nigeria in the last couple of weeks). So that suggests prospects are worse elsewhere right?

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JD on October 1, 2005 - 8:33pm

No, it suggests that West Africa is one of the few places where oil hasn't been nationalized.

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ChrisPhoenix on October 2, 2005 - 2:13am

OK, but why is nationalizing oil a Bad Thing, from this point of view?

If I understand correctly, it's because governments don't invest in enough capacity to get the oil out of the ground fast.

Why not?

Governments are fundamentally corrupt and inefficient.
They know peak oil is coming, so they want to save it for later.
???

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JD on October 2, 2005 - 9:33am

Good point. I personally believe that nationalized oil is a good thing because it leaves oil in the ground for later, causes higher prices, and will make the peak more of a plateau and gentle decline. If the OPEC governments could only be a little more incompetent and inefficient... then I'd be really happy!

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