Oil Patch update: fall 2015 (Austin, China: leases, buyers, price)

[Midessan]

Originally Posted by Philip T

Yeah, does not really work that way.

With Wishes, I mean.

Real question limiting the Top End price is who pays and what they will pay for it.

Here are some rough numbers -- down scaled to Retail Fuel Prices (yeah, just scale Gasoline with Diesel with Aviation:

================

Typical US Driver -- Less than $5 / gallon. Will start cutting back before there and pretty much stop by $10 / gallon.

Trucking -- Winds down to near stop at around $10 / gallon.

Farming -- Falls off between $10 and $20 / gallon.

Airlines -- Not a lot flying at $10 / gallon and above.

Military -- Can fly to $50 / gallon

===============

Since the US Drivers and Trucking are BOTH the biggest users, AND the first to fall off the pump, they sort of set the Maximum World-Wide Price on Oil.

But at that Top End price -- Frack Oil, Tar Sands Oil, and Denbury's CO2 Oil are all profitable.

Interesting. Where did you get these numbers? One thing to keep in mind is that most industries won't just shut down, because of sunk costs and all. Instead they will pass higher fuel costs on to consumers. But I don't that's too big a deal. As you said, as oil prices rise, more kinds of oil become profitable adding more supply and bringing prices back down.

[Dopo]

Originally Posted by Midessan

If the Saudis are trying to crush the Basin, their plan may have backfired horribly.

This shows people lack of knowledge on the subject
Saudi Arabia has been an US ally for several decades

[Midessan]

Originally Posted by Dopo

This shows people lack of knowledge on the subject
Saudi Arabia has been an US ally for several decades

Herp, its almost like I am joking or something. Derp.

[Philip T]

Originally Posted by Midessan

Interesting.

Yeah. Or at least I thought so, too.

Where did you get these numbers?

Working across several refineries, Oil, and other related business. Engineering consultant doing modernization and (re)builds. Since I would usually go to lunch with various Corporate VPs and Senior Staff, I would get to pick their brain(s) and build the model. Same on the other side since I also do Transportation, Farming, and Military Projects. Even when folks understood what I was doing, they did not really seem to understand it.

The refinery folks sort of figured Oil came in one pipeline, and refined products went back out in another, and money came from everywhere. They truly did not understand that their customer did not operate in their belief system, and volume of sales and demand (half the factors in Cash Flow) could actually reduce. THAT had never happened before.

So when BOTH the volume of sales AND the price went down -- it was total Cash Flow collapse.

Can go much deeper if you are interested.

One thing to keep in mind is that most industries won't just shut down, because of sunk costs and all.

Instead they will pass higher fuel costs on to consumers.

Trucking tried that for awhile -- called it a "Fuel Surcharge." But you may be making the same mistake those Refineries made -- thinking the customer had infinite money or something. It is not like a decision the buyer nor the seller gets to make. They simply run out of money, and it is Game Over, on both sides.

Really the truckers' customers went to trains, or cut back on shipping.

At that point -- when the customer has to walk away -- the supplier is no longer in control of anything. When the Net Cash Flow goes to Zero or below . . . shut down HAS to Happen. Because negative Cash Flow cannot be sustained.

But I don't that's too big a deal. As you said, as oil prices rise, more kinds of oil become profitable adding more supply and bringing prices back down.

Yeah, that is the end patterns of a passing commodity market. The prices and supplies bob up and down, oscillating between the limits of the Max and Min. You follow that our friend Westerntraveler is sort of figuring the old school model, that prices can go way up?

They can't. Rule number 1 of business is that the customer MUST have money, and be able to buy your product. When there is a high enough price -- folks just cannot.

Instead of getting to run fully to a peak price or a floor price, it can only oscillate up and down faster and harder. Sort of what the Futures Market (at its best purpose) is supposed to prevent.

By somewhere in 2017, much of the US / Canada supply will have been forced to throttle back production, and there may be a rapid rise in the price. But since the Unconventional Oil Tech and Methods are now well established, with the "then" higher price, the (by then, new US / Canada Producers will all rush back trying to beat each other to market. Which again causes surplus, and a collapse, on and on.

Lather, Rinse, Repeat.

[Creature of the Wheel]

Originally Posted by Westerntraveler

No i was being dead serious and i will be making millions a month if and when that happens.......i wish gas was 5 bucks a gallon.....we can never predict the long term price of oil accurately.

[kidicarus89]

Originally Posted by Westerntraveler

No i was being dead serious and i will be making millions a month if and when that happens.......i wish gas was 5 bucks a gallon.....we can never predict the long term price of oil accurately.

I wish oil was 5 bucks, too. It's getting pretty scary for a lot of us new geologists/geophysicists entering the job market in the next year.

[Dopo]

Originally Posted by kidicarus89

I wish oil was 5 bucks, too. It's getting pretty scary for a lot of us new geologists/geophysicists entering the job market in the next year.

Oil at 5 bucks is not going to help you

[Philip T]

Originally Posted by kidicarus89

I wish oil was 5 bucks, too. It's getting pretty scary for a lot of us new geologists/geophysicists entering the job market in the next year.

Maybe consider Water, Geo-Thermal, Earthquake Stabilization . . . ?

Even asteroid mining if you like truly exotic . . .

And not so much about (now) 100 year-old technology of digging up and burning Dinosaur Poop?

I think you likely have a bright future, if you choose it . . . . but not so much if living in the past.

[Midessan]

Sweet Permian tiramisu.

Oil Producers Hungry for Deals Drool Over West Texas `Tiramisu' - Bloomberg Business

The Permian’s multiple layers of oil- and gas-soaked rocks, in some places stacked 5,000 feet thick, contain plenty of places to drill that will yield 30 percent to 40 percent rates of return with crude prices as low as $40 a barrel

[Dopo]

Originally Posted by Philip T

Typical US Driver -- Less than $5 / gallon. Will start cutting back before there and pretty much stop by $10 / gallon.

Hilarious,
ok, so people are going to ditch cars and do what?

If gasoline gets too expensive, the first thing people are going to do is car pool.
With 4 people in your car, you cut the cost of gasoline to 25%.