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

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Will on November 1, 2005 - 3:31pm 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..."

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Glenn on November 1, 2005 - 3:52pm 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.
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Will on November 1, 2005 - 4:06pm Permalink | Subthread | Parent | Comments top
Exactly.

And this is a profoundly inflationary development.

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Dan Ur on November 2, 2005 - 2:09am 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.

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