Oil Price Increases After Biden Shuts Down Drilling Permits Again

[Zoe]

There is no doubt some people will lose their house over increase in utilities on home and gas prices. The budget is too tight.

 

[KHS445]

Europe gets a bunch of oil from Russia. The oil companies know it. That is the reason for the jack in gas prices here. You would think congress would try to open up more drilling and pipelines.

The words "think" and "Congress" should never be used in the same sentence.

I don't even know how long it takes to do a new oil drill and start getting production. I'm, sure if govt was subsidizing it that it would get done. Don't know how long it would take.

Terrill would know better than I for the larger fields out west. My guess would be the complete permitting process and not just the land permit, would take somewhere in the 12 month range, then the problem becomes having workers in the right place, obtaining not only the drill rig itself but also all of the ancillary equipment. When new exploration is shutdown or restricted some how, workers and equipment scatter and pulling things together can take time. Many times owners of equipment will scrap it and get some return on their investment rather than letting it sit in a field and rust. Also reduces the equipment inventory which increases the value of any functioning equipment.

My uneducated guess would be if well coordinated, it would take well over a year and probably closer to 3-5 years to ramp up any serious level of sustainable production.

 

[Zoe]

The words "think" and "Congress" should never be used in the same sentence.

Terrill would know better than I for the larger fields out west. My guess would be the complete permitting process and not just the land permit, would take somewhere in the 12 month range, then the problem becomes having workers in the right place, obtaining not only the drill rig itself but also all of the ancillary equipment. When new exploration is shutdown or restricted some how, workers and equipment scatter and pulling things together can take time. Many times owners of equipment will scrap it and get some return on their investment rather than letting it sit in a field and rust. Also reduces the equipment inventory which increases the value of any functioning equipment.

My uneducated guess would be if well coordinated, it would take well over a year and probably closer to 3-5 years to ramp up any serious level of sustainable production.

We are just forked on gas for a little while. I hate for people on really tight budget. It's crazy to fill up on prices. I remember same thing right before last real estate crash. It's setting nation wide all time records now. In last real estate crash, I think gas prices was straw that broke camel's back.

 

[Zoe]

It's a bunch of money per household in the whole USA. It's not just gasoline for cars. It is natural gas for heating also.

 

[Zoe]

I keep my house cold. I use electric space heaters in the areas I stay in. Thermostat on about 62. I know you think that is crazy. I have gas heat. I have car that averages around 35 mpg. The electric heaters keep it about 70 degrees in the areas I work and stay in. Small area. Kitchen oven and stove heat up kitchen when I'm cooking.

 

[Zoe]

I am very hot natured. I can sit in underwear in 65 degrees. I am not kidding. Only reason I keep it warmer is wife is cold natured.

 

[Terrel L. Shields]

Wells were permitted as 80-acre units

Depending upon the "pooling" laws, the size of the drilling unit matters in that outside that drilling unit the leases can and will expire but if in that area, you are prorated according to the number of acres you control. Federal and state land is somewhat different and a well can hold a larger area. In many areas, the pool (or unit, etc.) is 640 to 1280 acres for gas and maybe only 40 for oil - varying by depth and geology.

The collapse of Penn Square Bank in 1982 changed the oil field significantly from a lenders and regulators standpoint. A friend and customer of mine had a $12,000,000 construction loan called by Continental Bank (Chicago) about two months before his new office building overlooking Grand Traverse Bay was completed.

Ah, I remember it well...Culpepper and Patterson. Patterson was a lender known for drinking beer from his boot or girlfriends pumps... last I knew he was running a lawn and landscape business, but he was trying to get a master's degree in language or something. Cliff Culpepper had a company called Port's o' Call and drilling an extremely high pressure and dangerously over-pressured well that the experts were uncertain how to even put into production without damaging the formation. Culpepper sold shares in the well... and sold shares in the well. Lawyers in OKC were bragging about owning a piece of that well...but Culpepper had sold about 250% of the well...math was not his long suite. Showing off, he cracked a valve on the well and flared gas to some investors. When they closed the value, the pressure went to zero indicating the well had caved in downhole. It never produced as much as it should have. And it took some 3 years to get it into production at a cost of $30 million.

Bill "Beep" Jennings ran the bank....straight into the ground. A microcosm of the crash of 2008. I think Continental and Michigan Nat'l Bank as well as Chase and a host of other banks were owed millions. My Patterson story was a friend, best drilling engineer I ever saw, went to Patterson with a large folder spelling out how he wanted to operate a small drilling company with a truck mounted rig drilling 5,000' deep wells in the Sooner Trend. Patterson never even looked at the documents and waved his arm saying "I will lend you $250,000, more if you want it. Come back tomorrow and my secretary will have papers to sign." I actually lived on Pennsylvania Avenue, a short distance south of Penn Square.

 

[Terrel L. Shields]

That is the reason for the jack in gas prices here.

The prices are worldwide and the prices here are very much dictated by the local supply. They don't "jack up the price"- it is dictated by the futures market and contract terms. Oil companies do not control the price, Wall Street does.

Automobile companies are investing billions in electric vehicles

Nope, they are investing millions in designing electric cars and trying to figure out where they are going to get cobalt, copper, nickel, and lithium to run them...

I don't even know how long it takes to do a new oil drill and start getting production. I'm, sure if govt was subsidizing it that it would get done. Don't know how long it would take.

Once leases are obtained, they are likely to run seismic which also requires a permit and permit process, then they have to contract a crew and wait for them. Then the geophysicists evaluate the seismic, the geologists determine the best locations to test, then if any private land is nearby, they send landmen out to try and secure those leases as well. Then the permit is applied for, they survey and stake the site, after that they do a botany, biology, and archaeology survey of the site. If BLM, the BLM offices are slow, and then have to approve a road plan. In many cases, they will allow drilling only in certain months, such as banning activity during nesting season of the blue grouse. And if the environmentalists or "First People" sue you, the process is delayed usually at least one year, sometimes several. Since leases are 5 years then the lease holder has to apply to toll the lease (so a 5 year lease might stretch into 6 or more years). Then you have to contract a rig and that might be a 90 day to one year process depending upon the kind of rig needed.

 

[Terrel L. Shields]

As oil prices appear to fall back to pre-Ukraine levels (low 90s) I see gas stations are not raising prices this week. This suggests the market doesn't think Ukraine is a factor (well, they are not a big oil producer) but the impact of Russian supplies on the world market will take weeks to work thru the "supply chain". But primarily traders are taking profits as the UAE calls for OPEC to increase production.

Oil Prices Crash By 11% As UAE Calls On OPEC To Open The Taps | OilPrice.com

In a complete oil industry turnaround, The UAE’s ambassador to Washington has said in a statement to the press that they “favour production increases and will be encouraging Opec to consider higher production levels.”

oilprice.com

Meanwhile, China is working a deal with the Saudis to sell oil in Yuan to China...the dollar dominance may be ending soon. The EIA says that the USA is still a net exporter of oil although that seems marginally true on the surface. We still must import a medium blend optimal for gasoline production and export the "liquids rich" light oils elsewhere. And the majority of Americans polled (71%) want the Keystone pipeline completed.

The Majority Of Americans Wants To Revive Keystone XL Pipeline | OilPrice.com

Most Americans now support a resurrection of the Keystone XL oil pipeline project for carrying oil from Canada to the United States

oilprice.com

 

[Vermonter]

the dollar dominance may be ending soon

This should be our biggest worry.

Luckily the rest of the world is struggling at the moment, including China which is probably our saving grace. They do have the ability to turn their economy around easier than we do tho. Just ask Trudeau

https://www.cbc.ca/news/canada/toronto/justin-trudeau-s-foolish-china-remarks-spark-anger-1.2421351