Constructive gadfly
Published on August 16, 2008 By stevendedalus In Politics

 Between a $6million going rate for offshore oil prospectus and almost a billion for oil rigs it appears that there's really no incentive to get moving on drilling offshore. It's a bit much to think that oil companies are that inspired to search for more oil where it will take them at least a decade to bring to fruition and the return on investment would be virtually nil unless the going rate for a barrel of oil at the time would be in the neighborhood of $500.

Try to imagine the costs involved if some 300 rigs were floating in coastal waters representing $300 billion in hardware, not to mention licenses and the upkeep for a decade before risky results. I would seem far more prudent to begin investing that kind of money in fuels of the future, or at least a massive investment in clean coal.

Copyright © 2008 Richard R. Kennedy All rights reserved. Revised: Aug 16,  2008.

http://stevendedalus.joeuser.com

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Comments (Page 1)
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on Aug 16, 2008
YOu have a lot of history, but poor math skills. A billion for the physical plant is chump change when you can pump a billion barrels. SO unless oil goes to under $10/barrel, the return is there.

Besides, the physical plant is unfortunately only a small part of the cost. The litigation necessitated by the Greens make up as much if not more of a the cost. And then of course there is the Pelosi tax.
on Aug 17, 2008

Not to mention new wells don't always mean new oil rigs. The old ones are moved and reused. Amazing how information can be bent to help promote the entire "it's hopeless" agenda.

on Aug 18, 2008
Amazing how information can be bent to help promote the entire "it's hopeless" agenda.


I don't have an agenda: No one's promoting a hopelessness, but I am saying that there is much involved even in reusing rigs and moving on to other treacherous areas. Not to mention the shortage of manufacturing new rigs.
pump a billion barrels


Optimistic, but even so it's going to take a heck of a long time.
on Aug 18, 2008
Optimistic, but even so it's going to take a heck of a long time.


That is why private companies capitalize, and dont expense. They do not look to earn back their investment immediately, but over the long term. A return of 10% is outstanding! But most companies settle for returns of 2-8% annually, and invest based upon those numbers.
on Aug 18, 2008

And don't forget the fact that it's cheaper, in the long run, to pump your own oil out of the ground (or ocean) than it is to buy oil from another country.  Either way you cut it, it is definitely in the oil companies best interest to move rigs or build new ones to pump out domestic oil.

And some of the numbers that I've heard is that if the OCS and/or ANWR were opened up for drilling tomorrow the oil companies could be pumping out oil within 2-5 years not 10 years.

on Aug 18, 2008

I don't have an agenda: No one's promoting a hopelessness

I'm not suggesting it's your personal agenda, just "this" is an agenda that is being promoted (your facilitating its promotion, that's fine if that is what you believe). One just has to turn on the TV, radio, or open the newspaper. It goes like this, "it takes too long to drill, so why start", "we won't see any oil for ten years" and "you must not support alternatives if you want to drill", it goes on and on. Sounds like hopelessness to me (on this issue). When did this turn into a nation of whiners as opposed to the "We can do it" society you often blog about (30's and 40's)? Instead of why "we can't (or won't)" how about a little "let's try". If this is the change that the Dem's are offering this November, keep it,because IMO it's a change for the worse.

on Aug 19, 2008

"it takes too long to drill, so why start",
Not so. In the seventies we heard the same story that domestic oil would fix the problem; yet the oil companies never took the lead because Arabian reserves were brimming in oil and kept prices stable after thy had gotten their 10-15 bucks per barrel, still making it unprofitable for domestic oil. To expect oil moguls to drill at the prices of yesteryear is ridiculous. Gas prices will not go down much because of domestic production--all we can expect is pride and peace of mind. With our huge stretch of roads and highways we are dependent on the automobile more than other nations, but the automobile of today is based on prices of yesterday and that's why we must look for alternative fuels and at much lower prices and cars that have greater mpg. 

on Aug 20, 2008

In the seventies we heard the same story that domestic oil would fix the problem; yet the oil companies never took the lead because Arabian reserves were brimming in oil and kept prices stable after thy had gotten their 10-15 bucks per barrel, still making it unprofitable for domestic oil.

You are right, but miss a critical piece.  OPEC did wise up in time, and kept the price at a level that would maintain their monopoly, but the other half of the equation was equally as damning.  In order to "punish" the oil companies, Congress passed the windfall Profits tax - effectively supporting OPEC in keeping the price high.  More so than OPEC or any other institution, Congress caused the Energy problems today with their desire to be punitive and the law of unintended consequences. 

Did they learn?  Did you hear Hillary and Obama?  The only difference is that Obama wants the higher prices in order to promote alternatives.  It is a good strategy, but unfortunately bad politics.

on Aug 20, 2008

Not so. In the seventies we heard the same story that domestic oil would fix the problem; yet the oil companies never took the lead because Arabian reserves were brimming in oil and kept prices stable after thy had gotten their 10-15 bucks per barrel, still making it unprofitable for domestic oil.

When the Congress brought about the wind fall profits tax it became profitable to get oil from overseas. We hurt ourselves three times with that tax. First we made ourselves vulnerable to blackmail from other nations. Second we charged the oil companies an additional tax that kept the money from being used to get more oil. Third, the oil companies passed the tax on to the consumer raising the price of gas making everything more expensive because we use trucks to move goods around the nation so everything that gets trucked or shipped costs more and people need more money so they ask for a pay raise to compensate for the higher prices so we are all paying two or three times the amount given to the government to punish evil big oil.

on Aug 21, 2008

When the Congress brought about the wind fall profits tax it became profitable to get oil from overseas.

Nonsense; oil companies knew where the profits were since the 40s; piddling tax never was a disincentive to drill here--it was just too costly in comparison to OPEC's.  

on Aug 21, 2008

Nonsense; oil companies knew where the profits were since the 40s; piddling tax never was a disincentive to drill here--it was just too costly in comparison to OPEC's.

That was the disincentive to the oil companies to drilling domestically, and you just made my point. Thanks.

on Aug 22, 2008

Nonsense; oil companies knew where the profits were since the 40s; piddling tax never was a disincentive to drill here--it was just too costly in comparison to OPEC's.

While it is a favorite line of liberals who love taxes, it has been demonstrated to be false countless times.  The simple fact of the matter is that taxes are costs to businesses.  Nothing more, nothing less.  If they can pass the costs onto consumers, then no big deal, they do.  And the consumer loses.  If they cannot, the business avoids the cost by looking for ways not to pay the tax - buy overseas.

Most people do the same thing with their purchases - look for the better value - yet cannot then believe that a company would be so smart.  They are actually smarter, but since they are not a "buddy" people then assign the intelligence to some other nefarious practice - usually greed.  They are no more greedy than the guy who buys sodas on sale at the store across town instead of down the street because they are cheaper.

But a question for all liberals.  If we are to beleive that we must raise taxes when times are tight and government revenues fall short - why dont we get a tax rebate when times are good and tax revenues exceed forecasts? (I dont say need as government has not had a problem needing every penny it gets).

on Aug 22, 2008

That was the disincentive to the oil companies to drilling domestically, and you just made my point. Thanks

By your  distortion, not the government's extortion. Nor am I arguing in behalf of windfall profits, but there will always be taxation on money-making or there'd be no infrastructure and targeted direction toward needs. Nor do you mention oil subsidies. 

on Aug 22, 2008

While it is a favorite line of liberals who love taxes, it has been demonstrated to be false countless times. The simple fact of the matter is that taxes are costs to businesses.
Simplistic. No one "loves" taxes. The simple truth is that taxation is a necessary substructure to carry on business and labor to guarantee protection from exploitation and outright crime, not to mention national security. 

on Aug 22, 2008

Simplistic. No one "loves" taxes.

Then answer my other questions.  Why is the clown (who may be your next veep) crying because the GA will not raise taxes due to a budget shortfall, but found lots of ways to spend the money the last few years when the coffers were over flowing?

It works in this state and the nation.  The simple fact is that they HAVE taxes.  They just want more and more, but never less.

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