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Drill baby drill #7545866 07/01/19 03:43 PM
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I just hear that as of The end of April the United States is producing 12 million barrels of oil a day. Therefore, we are now the largest producer of oil in the World and the hope is by the end of the year is to be at 13 million barrels a day.

Re: Drill baby drill [Re: Lakhota] #7545882 07/01/19 04:07 PM
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flag


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Re: Drill baby drill [Re: Lakhota] #7545883 07/01/19 04:14 PM
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'Murica. Hell yeah.


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Re: Drill baby drill [Re: Lakhota] #7545916 07/01/19 04:49 PM
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up flag

Re: Drill baby drill [Re: Lakhota] #7545937 07/01/19 05:23 PM
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flag cheers texas


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Re: Drill baby drill [Re: Lakhota] #7545947 07/01/19 05:42 PM
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So why am I paying $2.52/gal? Shouldn't it be closer to $1.50?


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Re: Drill baby drill [Re: NORML as can be] #7545950 07/01/19 05:52 PM
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Originally Posted by NORML as can be
flag cheers texas

Re: Drill baby drill [Re: LFD2037] #7545957 07/01/19 06:03 PM
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Originally Posted by LFD2037
So why am I paying $2.52/gal? Shouldn't it be closer to $1.50?


Not enough refineries!


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Re: Drill baby drill [Re: Lakhota] #7545969 07/01/19 06:24 PM
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This thread brings back old memories of when I was a young Chemical Engineer. The worry back then was that we, as a nation, were running out of crude oil. Everybody was wringing their hands and moaning. Well, heck, I believed that too. I didnít know the truth of the matter. And the truth was, we were running out of $20 Oil. We werenít really running out, we had plenty of $25, $30, $35 dollar oil. And we have, today, plenty of $60, $70 dollar oil.

And as for what gasoline costs at the pump, I just flat donít remember all the cost factors in the price. It is, of course, price based on supply and demand, but there is a lag in how that works. If thereís a run on gas and inventories fall, then prices rise (quickly, as youíve noticed). If the inventory reduction wasnít expected, the impact is greater, but either way it takes a while to get the crude, refine it, and put in trucks, barges, and pipelines to get it into inventory. Worse, if the crude inventory isnít available, the price rises higher since we now have a raw material shortage and price competition for it. Short term, but still a shortage.

It was a very interesting business I was in as a Process Engineer. Then I went into oil trading and brother..thatís really crazy.


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Re: Drill baby drill [Re: BradyBuck] #7545971 07/01/19 06:27 PM
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Originally Posted by BradyBuck
Originally Posted by LFD2037
So why am I paying $2.52/gal? Shouldn't it be closer to $1.50?


Not enough refineries!


I read that our refineries are not capable of refining the crude coming out of west Texas ? Can that be right ?

MO



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Re: Drill baby drill [Re: MO] #7546021 07/01/19 07:46 PM
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Originally Posted by MO
Originally Posted by BradyBuck
Originally Posted by LFD2037
So why am I paying $2.52/gal? Shouldn't it be closer to $1.50?


Not enough refineries!


I read that our refineries are not capable of refining the crude coming out of west Texas ? Can that be right ?

MO

That's a complex infrastructure problem. One of the biggest problems in West Texas is pipeline capacity to get the crude to the refineries. Refineries can't process any crude, they are designed to process crude oil between a certain range, WTI crud, might not be able to be processed in a facility designed for a different class of crude. I remember when Valero was making a killing during a period of oil scarcity because they could process relatively cheap and available heavy crude. It's entirely possible that there isn't enough of the right refining capacity for the type of crude they a producing in West Texas.


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Re: Drill baby drill [Re: Lakhota] #7546032 07/01/19 08:02 PM
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If the crude is WTI (West Texas intermediate), the refineries were originally designed to handle it. If itís a shale oil, I have to admit that I donít know the properties, so donít know if they can run it. I would be very surprised however, if they couldnít run it. Refineries these days have evolved to be able to run many different types of crude oil. But not every refinery has that degree of feed flexibility.

Iíd expect that many refineries have been running the shale oil for some time. Once a major refiner had plans for shale oil recovery, either buy it or recover it themselves, they would have put the necessary plant modifications into their Capital Budget Proposal. That should have happened years ago. You donít just buy a new and different crude and run it into your Crude Oil Distillation unit, clasp your hands and pray for success.

In the middle 70ís, the refinery I worked for decided to run a Mexican crude oil called Maya. We made the changes to the plant to be able to handle it, but it was way too thick and heavy (as opposed to a light crude like WTI), and our changes werenít enough. We could not run it till further changes were made and big money was spent.


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Re: Drill baby drill [Re: Lakhota] #7546058 07/01/19 08:42 PM
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I just read that the oilfield services company Weatherford International has filed for Chapter 11 bankruptcy protection.


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Re: Drill baby drill [Re: LFD2037] #7546079 07/01/19 09:32 PM
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Originally Posted by LFD2037
So why am I paying $2.52/gal? Shouldn't it be closer to $1.50?



too much tax on a gallon


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Re: Drill baby drill [Re: bucksnbass357] #7546102 07/01/19 09:48 PM
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Originally Posted by bucksnbass357
Originally Posted by NORML as can be
flag cheers texas



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Re: Drill baby drill [Re: reeltexan] #7546129 07/01/19 10:13 PM
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Originally Posted by reeltexan
Originally Posted by LFD2037
So why am I paying $2.52/gal? Shouldn't it be closer to $1.50?



too much tax on a gallon



Yup....youíre actually paying about $1.25/gal plus tax....


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Re: Drill baby drill [Re: Lakhota] #7546192 07/01/19 11:19 PM
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Shale oil is a Ponzi scheme that is bound to come apart at some point.

There are massive reserves in Shale Formations. It will provide us with oil for years to come, but its not economical compared to convectional production until prices get back up a lot higher than they are now.


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Re: Drill baby drill [Re: Lakhota] #7546237 07/02/19 12:04 AM
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^^^^^^ Can you explain what you mean by "come apart"?

Re: Drill baby drill [Re: jetdad] #7546312 07/02/19 01:44 AM
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Originally Posted by jetdad
^^^^^^ Can you explain what you mean by "come apart"?


Well maybe Ponzi is not the right word for it, but folks a lot smarter than me don't think Shale drilling and production are sustainable in this oil price range (think: They need oil prices to double ).

My limited understanding is that Shale wells tend to deplete more rapidly than conventional production, so your drilling program has to be continuous, to maintain the same production level. They cost more to get into production and to keep in production.

Many, maybe all, of the drilling and producing the Shale plays are operating at a loss.

Think Tesla and Uber...

You cannot keep this up for long...and where is the money coming from? The majors are diverting profits from core business to fund the Shale programs. The small, and maybe some of the larger guys, are borrowing money to drill and pay investor dividends. All of this is based upon the hope that if oil prices double, they will suddenly be sitting on a goldmine, and can repay what they have borrowed, or diverted. What happens if that windfall does not come?

LInk: Shales not profitable

LInk: More smart people on Shale Production


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Re: Drill baby drill [Re: Lakhota] #7546315 07/02/19 01:47 AM
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I was told not too long ago, by a person whose knowledge I respect, that shale oil can be economically produced at and below todayís price point. That does not mean that every producer will be able to recover it at this level. Some producers will fail and be sold to more efficient companies.

Itís just a guess, and worth every penny you paid me, but I expect that crude oil prices will wobble along at or near todayís level for a number of years, unless or until something drastic and unexpected happens. It might even get a bit lower for a time. Itís too early to tell what impact electric vehicles will have, but that should be more of a long term thing, not short term. It might even have the same market effect that diesel in cars did. Going to diesel was supposed to be the smart way to go, and it was cheaper. Well, it was cheaper because demand was relatively low. When demand jumped up quickly, people finally realized that our refineries were designed to produce mostly gasoline, and diesel production was just a small part of the yield of a barrel of crude. Diesel prices rose above gasoline and stayed there. Whatís going to happen when electricity demand for a bazillion cars and trucks hits the market. We already have brownouts in parts of the US during hot weather. Now letís increase demand dramatically and weíll see what happens. Power costs should rise to levels we havenít seen before. Old ladies and the inner city welfare crowd wonít be able to run the AC units. And not one politician will have seen this coming.

Forgive me for sounding a bit negative, but Iíve been around a while and Iíve seen this dance before.


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Re: Drill baby drill [Re: dogcatcher] #7546344 07/02/19 02:21 AM
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Originally Posted by dogcatcher
I just read that the oilfield services company Weatherford International has filed for Chapter 11 bankruptcy protection.


Yep. I worked there for almost a decade. I went to another company when they closed their doors in Fort Worth. I have been out of the oil field completely now for 3-4 years. I remember when Weatherford stock was around $150/share, then it split and they were growing like crazy. Huge company. Last I checked, before the chapter 11 filing, stock was around 27 cents. Crazy.


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Re: Drill baby drill [Re: nak] #7546361 07/02/19 02:52 AM
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Originally Posted by nak
Originally Posted by jetdad
^^^^^^ Can you explain what you mean by "come apart"?


Well maybe Ponzi is not the right word for it, but folks a lot smarter than me don't think Shale drilling and production are sustainable in this oil price range (think: They need oil prices to double ).

My limited understanding is that Shale wells tend to deplete more rapidly than conventional production, so your drilling program has to be continuous, to maintain the same production level. They cost more to get into production and to keep in production.

Many, maybe all, of the drilling and producing the Shale plays are operating at a loss.

Think Tesla and Uber...

You cannot keep this up for long...and where is the money coming from? The majors are diverting profits from core business to fund the Shale programs. The small, and maybe some of the larger guys, are borrowing money to drill and pay investor dividends. All of this is based upon the hope that if oil prices double, they will suddenly be sitting on a goldmine, and can repay what they have borrowed, or diverted. What happens if that windfall does not come?

LInk: Shales not profitable

LInk: More smart people on Shale Production



You can't compare break even with a given company's ability to raise additional capital in the public arena. There are many shale producers that are profitable at todays prices. Increasing production year over year is a component of raising capital and keeping the financial engine running. While it is probably true that some E&P companies have been over zealous with their drilling programs that doesn't mean the sky is falling. Adjustments are always made whether voluntarily or market induced. The over leveraged usually lose in any volatile commodities market. Focusing solely on growth is not a good model.

Re: Drill baby drill [Re: nak] #7546485 07/02/19 12:03 PM
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Originally Posted by nak
Shale oil is a Ponzi scheme that is bound to come apart at some point.

There are massive reserves in Shale Formations. It will provide us with oil for years to come, but its not economical compared to convectional production until prices get back up a lot higher than they are now.


That is not true. Obviously conventional plays are going to be more economical - they're much cheaper to drill. You're talking $2-3mm wells vs $8-20mm wells. However, shale plays, at current prices can be economical with the right operator even below current prices.

Technology has advanced far enough in all aspects of exploration and drilling to bring costs down.

With that said - there is a half truth to your statement. Private equity companies - companies that have ZERO business operating in the E&P field have been majorly in the game since the big downturn in prices. These companies are driven by $$$$$ - not common sense. $$$$$ does not always equate success in the E&P business. There are dozens of E&P companies, not tiny ones either, that are filing chapter 11 because their approach (and private equity control) made them do things that were NOT common sense and they've quickly ran their companies into the ground.

Re: Drill baby drill [Re: SnakeWrangler] #7546545 07/02/19 01:19 PM
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Originally Posted by SnakeWrangler
Originally Posted by reeltexan
Originally Posted by LFD2037
So why am I paying $2.52/gal? Shouldn't it be closer to $1.50?



too much tax on a gallon



Yup....youíre actually paying about $1.25/gal plus tax....



In Texas, state and federal taxes on gasoline is 38.4 cts per gallon, diesel fuel/distillates carry a 44.4 cts per gallon tax.

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In Texas, state and federal taxes on gasoline is 38.4 cts per gallon, diesel fuel/distillates carry a 44.4 cts per gallon tax.



That's just what they get at the pump, they grab a big handful right at the wellhead.

Last edited by HWY_MAN; 07/02/19 11:31 PM.

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