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re: What’s bad about the price of oil dropping?
Posted on 3/9/20 at 10:31 am to Parmen
Posted on 3/9/20 at 10:31 am to Parmen
Low oil prices hurt the economies in Texas, Louisiana, Oklahoma and many other states. It has trickle effects to every industry that provides services to those populations (real estate, construction, automobiles, etc), it hurts state budgets that depend upon the tax dollars of services (industrial and personal), it hurts construction projects related to alternative energy (yes - solar and wind cannot compete with $30 oil), etc. People tend to only see their own little world, but killing the economy in an industry as big as the oil industry will have ripple effects over the entire country. I can go on and on, but imagine if Chevron, ExxonMobil, Shell....all reduced orders for vehicles, steel products, services.... by 80%. Imagine what would happen to struggling retailers and restaurants if the oil industry suspended capital and expense projects and laid off the contract work forces. What would happen if everyone whose salary depends either directly or indirectly cancelled their vacation, large purchase, repairs, etc for the next few years?
This post was edited on 3/9/20 at 10:34 am
Posted on 3/9/20 at 7:31 pm to Ramblin Wreck
Bob Dudley recently retired as CEO of BP. He made a comment recently that was pretty eye-opening - that “ BP, Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp and Total SA are “only responsible for producing about 8% of the world’s oil. If we were all driven out of business that oil would still be produced” by national oil companies and other countries“ (from Bloomberg). Basically, they could all go out of business but O&G will still be produced by the national oil companies...
My fear is that the companies overreact to this cut. We are already understaffed with previous cuts and I’ve heard that many budgets for this year were expecting near $60 oil. With the warm winter and gas prices below $2, if you had gas in your unconventional, you were already losing money and new drilling had stopped. As the Initial Production (IP) in the first 2 years determines if you can break even on a gas well, many wells that were drilled and shut in aren’t going to be completed. It just might take a year or two for the current supply to catch up to demand...
My fear is that the companies overreact to this cut. We are already understaffed with previous cuts and I’ve heard that many budgets for this year were expecting near $60 oil. With the warm winter and gas prices below $2, if you had gas in your unconventional, you were already losing money and new drilling had stopped. As the Initial Production (IP) in the first 2 years determines if you can break even on a gas well, many wells that were drilled and shut in aren’t going to be completed. It just might take a year or two for the current supply to catch up to demand...
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