Gas prices are... um well, wait a minute

[Shaun @ Tru6]

I'm now thinking it will take you until April or May next year.

[Sooner or later]

What happened to O&G from 2014 to 2021? Why would anyone really expect O&G to go back to drill, baby, drill? It was a disaster for the industry and shareholders. 2014 through 2021 nearly broke to back of US shale. Producers would have to be insane to go back to the 2014/2021 business plans.

https://www.cnbc.com/2016/09/28/oil-bankruptcies-100-down-maybe-100-more-to-go.html

Sept 28th, 2016

Roughly 100 North American oil and gas companies have filed for bankruptcy since the start of a two-year oil price rout, and the industry may be only halfway done, according to restructuring specialists.

The crude glut has persisted longer than many thought, and the prolonged oversupply has kept prices stuck in the $40 to $50 range for much of the year. U.S.-traded West Texas Intermediate crude jumped more than 5 percent on Wednesday after OPEC reportedly reached a deal to limit production, but by and large, there has been little reprieve for drillers and service companies...

https://www.haynesboone.com/news/press-releases/oil-and-gas-bankruptcy-filings

Feb 1, 2022

These final reports mark the culmination of Haynes Boone’s tracking of energy filings, which the firm began in 2015 at a time when the energy industry faced enormous headwinds.

Over the ensuing six-plus years, Haynes Boone has catalogued hundreds of filings by oil and gas producers, oilfield services companies, and midstream companies, which we have detailed in our Oil Patch Bankruptcy Monitor, Oilfield Services Bankruptcy Tracker and Midstream Report. All have been read avidly by industry professionals and media outlets around the world.

“In truth, we never expected to be tracking oil and gas bankruptcies this long, but the unprecedented, sustained level of filing activity since 2015 — involving a total of more than $321 billion in secured and unsecured debt — has required our continued vigilance,” said Haynes Boone Partner Buddy Clark, co-chair of the Energy Practice Group. “Happily for our oil and gas producer clients and investors, the tidal wave of filings has finally ebbed to a point where we can discontinue the bankruptcy reports. We are calling an end to this cycle but, as history is our guide, there will be another cycle, and Haynes Boone will lead the way once again.”

[fintstone]

Originally Posted by Sooner or later

What happened to O&G from 2014 to 2021?
...

What happened? They sold gas and oil cheap. Strong, well run companies did well, and poor ones failed. Just like any other business.

Originally Posted by Sooner or later

What happened to O&G from 2014 to 2021? Why would anyone really expect O&G to go back to drill, baby, drill? ...

Because they have said that they would. Because if they did not, they would not be able to compete with others that did. If they held their production low and prices high, other producers would enter the market and take their market share...just like any other free market industry. Reduce regulation and encourage production and prices will go down.

[Paul T]

Originally Posted by fintstone

I can buy your assertion that no single producer can currently produce enough oil in the US to meaningfully impact the market...but they certainly could easily do so combined (and competing for market share) ...as the US has far more than other countries. Not price fixing like OPEC+...but just massive production and competition. The US government has tremendous influence on the price of oil...and the ability for drillers to drill/produce and refiners to add capacity (or not). As the US produces more and the excess drive prices down, folks like the House of Saud produce less to try to keep prices up (as noted in Shaun's post above). Also noted in Shaun's post above, OPEC only produces about 5.7% of global demand. So, what happens id=f the US increases production an equivalent of 10-15% of global demand? Suddenly OPEC has almost zero leverage.

There is only so much that they can do reduce global production (to inflate prices) if the US produce two barrels for every one OPEC chooses not to produce. Eventually, there is true competition worldwide as other oil producers will not hold the line like the wealthy Saudis (and they will produce above the OPEC agreements) or starve.

It almost sounds like you are arguing for some type of nationalization of the US oil industry? You want producers to act in concert with one another to increase/reduce supply? It just does not work that way….different producers have very different economic structures - small and mid-sized producers need a certain level of spot price to which is becomes profitable to extract - this # is different for everyone. What makes the US unique is that we do not have a nationally controlled and state subsidized oil industry, so it’s not so simple as “let’s all get together and produce more en masse” as you seem to be suggesting? Unless I am misinterpreting you….

[fintstone]

Originally Posted by Paul T

It almost sounds like you are arguing for some type of nationalization of the US oil industry? You want producers to act in concert with one another to increase/reduce supply? It just does not work that way….different producers have very different economic structures - small and mid-sized producers need a certain level of spot price to which is becomes profitable to extract - this # is different for everyone. What makes the US unique is that we do not have a nationally controlled and state subsidized oil industry, so it’s not so simple as “let’s all get together and produce more en masse” as you seem to be suggesting? Unless I am misinterpreting you….

It is not at all 'like I am arguing for some type of nationalization' of anything. You (like Shaun) are just trying to come up with an argument (that I did not make) that you can mount a defense to. If you cannot argue the points that I made, making up a position for me that I did not espouse that you can defend against is just a waste of time.

As far as your premise that I somehow was looking for price fixing/cartel-like structure...I just explained to you why that was not the case in response to your last post.

Originally Posted by fintstone

I can buy your assertion that no single producer can currently produce enough oil in the US to meaningfully impact the market...but they certainly could easily do so combined (and competing for market share) ...as the US has far more than other countries. Not price fixing like OPEC+...but just massive production and competition. The US government has tremendous influence on the price of oil...and the ability for drillers to drill/produce and refiners to add capacity (or not). As the US produces more and the excess drive prices down, folks like the House of Saud produce less to try to keep prices up (as noted in Shaun's post above). Also noted in Shaun's post above, OPEC only produces about 5.7% of global demand. So, what happens id=f the US increases production an equivalent of 10-15% of global demand? Suddenly OPEC has almost zero leverage.

There is only so much that they can do reduce global production (to inflate prices) if the US produce two barrels for every one OPEC chooses not to produce. Eventually, there is true competition worldwide as other oil producers will not hold the line like the wealthy Saudis (and they will produce above the OPEC agreements) or starve.

Producers do not have to act in concert to increase supply, all they would need to do is operate in their best interests in an unfettered market where competitors can and will produce more and drive prices down. The only way they can keep their own revenues up (under lower prices) is to produce more. The only thing limiting production is US policy. The government just needs to get out of the way.

[Paul T]

Originally Posted by fintstone

It is not at all 'like I am arguing for some type of nationalization' of anything. You (like Shaun) are just trying to come up with an argument (that I did not make) that you can mount a defense to. If you cannot argue the points that I made, making up a position for me that I did not espouse that you can defend against is just a waste of time.

As far as your premise that I somehow was looking for price fixing/cartel-like structure...I just explained to you why that was not the case in response to your last post.



Producers do not have to act in concert to increase supply, all they would need to do is operate in their best interests in an unfettered market where competitors can and will produce more and drive prices down. The only way they can keep their own revenues up (under lower prices) is to produce more. The only thing limiting production is US policy. The government just needs to get out of the way.

Why would you think oil producers would be incentivized to keep prices down? That’s not their primary goal, ya know? They, like every corporation in America, exists to increase shareholder value, period. You are describing a race to the bottom, where unfettered production increases supply and drives pricing down, only to require even more production to increase profits. Hint: that strategy does not work in any industry and never will - particularly when OPEC can turn on the faucets and flood the market much quicker than we can. Your scenario would result in massive US bankruptcy filings in short order.

[cockerpunk]

yeah, any argument that the US oil companies have a market force to keep prices low is not understanding basic capitalism. every market force is pushing oil to the price that is highest, but low enough that will prevent you from adopting competing technologies.

the reason why this happens in other counties ... is nationalization of their oil industry.

which, to be clear, im not against. i think oil is national security issue, and so should be managed by national security interests, not to stockholder profitability. its ridiculous to me that we leave such an important commodity to be milked by middle men interested in profit, and not for the good of the country and its national interests.

[Paul T]

[Paul T]

Originally Posted by cockerpunk

yeah, any argument that the US oil companies have a market force to keep prices low is not understanding basic capitalism. every market force is pushing oil to the price that is highest, but low enough that will prevent you from adopting competing technologies.

the reason why this happens in other counties ... is nationalization of their oil industry.

which, to be clear, im not against. i think oil is national security issue, and so should be managed by national security interests, not to stockholder profitability. its ridiculous to me that we leave such an important commodity to be milked by middle men interested in profit, and not for the good of the country and its national interests.

I don’t disagree, but that’s a whole different discussion…

[wdfifteen]

Originally Posted by Paul T

Why would you think oil producers would be incentivized to keep prices down?

US producers can't keep prices down because they are not working on a level playing field. US oil costs more to produce than oil in a lot of other places. We have pumped most of the easy oil out of the ground. We are reduced to finding "tight oil" and using expensive fracking and offshore oil wells to get our oil, while the OPEC countries are still just drilling holes in the ground and pumping the oil out. We can never price compete with the rest of the world when our oil costs more to produce.
Large volumes of US oil can't be profitable at prices that OPEC countries can tolerate. That lets them manipulate the market, whipsawing prices to keep US producers off their feet.

[Paul T]

Originally Posted by wdfifteen

US producers can't keep prices down because they are not working on a level playing field. US oil costs a more to produce than oil in a lot of other places. We have pumped most of the easy oil out of the ground. We are reduced to finding "tight oil" and using expensive fracking and offshore oil wells to get our oil, while the OPEC countries are still just drilling holes in the ground and pumping the oil out. We can never price compete with the rest of the world when our oil costs more to produce.
Large volumes of US oil can't be profitable at prices that OPEC countries can tolerate. That lets them manipulate the market, whipsawing prices to keep US producers off their feet.

100% agree

[Shaun @ Tru6]

Originally Posted by cockerpunk

yeah, any argument that the US oil companies have a market force to keep prices low is not understanding basic capitalism. every market force is pushing oil to the price that is highest, but low enough that will prevent you from adopting competing technologies.

the reason why this happens in other counties ... is nationalization of their oil industry.

which, to be clear, im not against. i think oil is national security issue, and so should be managed by national security interests, not to stockholder profitability. its ridiculous to me that we leave such an important commodity to be milked by middle men interested in profit, and not for the good of the country and its national interests.

Originally Posted by Paul T

I don’t disagree, but that’s a whole different discussion…

I understand what you are saying and agree with the premise, I've been hawking oil as a national security issue for a decade but I think nationalizing oil would open up a level of corruption that would make Boss Tweed blush.

[Shaun @ Tru6]

Originally Posted by wdfifteen

US producers can't keep prices down because they are not working on a level playing field. US oil costs more to produce than oil in a lot of other places. We have pumped most of the easy oil out of the ground. We are reduced to finding "tight oil" and using expensive fracking and offshore oil wells to get our oil, while the OPEC countries are still just drilling holes in the ground and pumping the oil out. We can never price compete with the rest of the world when our oil costs more to produce.
Large volumes of US oil can't be profitable at prices that OPEC countries can tolerate. That lets them manipulate the market, whipsawing prices to keep US producers off their feet.

Well stated.

[fintstone]

Originally Posted by Paul T

Why would you think oil producers would be incentivized to keep prices down? That’s not their primary goal, ya know? They, like every corporation in America, exists to increase shareholder value, period. You are describing a race to the bottom, where unfettered production increases supply and drives pricing down, only to require even more production to increase profits. Hint: that strategy does not work in any industry and never will - particularly when OPEC can turn on the faucets and flood the market much quicker than we can. Your scenario would result in massive US bankruptcy filings in short order.

They are not incentivized to keep prices down, they are incentivized to produce more (just like any other market that does not collude illegally within itself). There is always someone that can produce any item/commodity for a bit less than others. Usually through scale. If they are allowed to do so, they take market share with a lower price...less per item/quantity...but a lot more sales. Other producers have to reduce their prices to compete.

If OPEC turs on their faucets and believers more than the less than 6% they do now, then that will also drive down prices. Since 94%+ is not OPEC, they seemingly cannot control prices unless they are allowed to (through intentionally poor production in our country).

[fintstone]

Originally Posted by wdfifteen

US producers can't keep prices down because they are not working on a level playing field. US oil costs more to produce than oil in a lot of other places. We have pumped most of the easy oil out of the ground. We are reduced to finding "tight oil" and using expensive fracking and offshore oil wells to get our oil, while the OPEC countries are still just drilling holes in the ground and pumping the oil out. We can never price compete with the rest of the world when our oil costs more to produce.
Large volumes of US oil can't be profitable at prices that OPEC countries can tolerate. That lets them manipulate the market, whipsawing prices to keep US producers off their feet.

US producers can get them a lot lower and have. If other nations are "dumping" any commodity of national interest, that can easily be dealt with (assuming we can produce enough ourselves). We have the ability to produce all we need...if we (our government) chose to allow it.

[cockerpunk]

Originally Posted by Shaun @ Tru6

I understand what you are saying and agree with the premise, I've been hawking oil as a national security issue for a decade but I think nationalizing oil would open up a level of corruption that would make Boss Tweed blush.

corruption is a solvable problem, middle men profiting handsomely at the expense of the country, the economy, our national security, and the middle class is currently a feature of our system, not even a problem. a feature. and when the price crashes, who gets to bail them out? the same people who got milked for all those profits thats who. again, this is a feature of the current system.

like people say certain economic systems "only work on paper, never in the real world" but the oil market in the USA, doesnt even work on paper.

[Baz]

At the Circle K today on SR 44 out by the Interstate........

[Bob Kontak]

Originally Posted by wdfifteen

.........while the OPEC countries are still just drilling holes in the ground and pumping the oil out.

Or catching it as it pumps itself out.

[fintstone]

Originally Posted by Bob Kontak

Or catching it as it pumps itself out.

Well, they do still have to get it here (or wherever it is to be refined/used). Domestic oil is already here. Of course, some fools prevented companies from building pipelines that would have made transportation of American oil safer and less expensive. I guess their priorities were just a bit different than those of most Americans.

[stevej37]

Gas price down about 40 cents in the last week here.

Reg $3.05/gal Prem $4.05/gal