Fine: Washington, D.C., on oil and gas
by Daniel Fine, New Mexico Center for Energy Policy
The complete article is here-> http://www.daily-times.com/story/opinion/columnists/2015/12/28/fine...
The "deal" between the parties over the energy future of the United States and the San Juan Basin at the end of 2015 was the most misguided example of politics at the fuel pump since the 1970s. Then it was retail price control and now it’s a free-for-all in the price of oil in the world market with West Texas Crude approaching 10-year lows.
Lifting the restriction on exporting crude oil adds American oil to a world market which is over-supplied. Expect no cash flow increase for American producers and still lower world prices than with the restriction or ban in place.
This is not the place to assess the other side of the "deal." However, tax credit extensions for wind and solar as alternative fuels to replace coal and later natural gas are no longer of concern to the Republican Party in Congress.
With petroleum economics based on market prices, there is virtually no way that the "deal" will bring about tens of thousands of new jobs in the oil and gas fields. How does exporting crude oil lead to increased drilling and rig deployment if this increases supply in an oversupplied world market? On the contrary, it leads to lower prices and negative cash flows for producers who must cut their workforces.
If oil and gas prices rebound in the next three years, the alternative fuels are beneficiaries as tax credits shape new non-fossil fuel investment, offsetting the risk of lower oil and gas prices, This was no doubt the objective of the climate change politics of Paris and the Democratic Party in Congress as well as the White House.
Although U.S. oil refiners will have a transportation cost tax adjustment from the "deal," what prevents them from buying foreign oil at lower prices than American oil (North Sea Brent at declining prices)?
For more than a year, I have developed an analysis of an OPEC/Saudi Arabian price war against American shale or light tight oil producers. This was regarded lightly while industry and Wall Street funds held on for a price recovery by last June. Now what I wrote in these columns is "mainstream" and U.S. producers survive through selling forward with "hedges."
What will be left of the San Juan Basin oil and gas economy in 2017? Will exporting crude oil to Poland or Sweden, against Saudi discounts, contribute to a Four Corners economic rebound?
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Replies to This Discussion
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Permalink Reply by Joseph-Ohio on -
It's not that I think we are better than anyone - in fact I think we are all the same mortal beings shuffling along on the surface of our planet earth.
It is that I'm more concerned about our own well being than about that of the others who would rather kill us than deal honestly with us.
They're out there and it's not fear or delusion either writing here - it's evident / obvious.
If it's obvious to me (one who struggles most of the time to understand the ways of the world) it ought to be obvious to many, many more of us.
Good luck friend and neighbor - I still very much think that we need it.
JMHOs
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Permalink Reply by Mike Fulper on
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Patton and McArthur had a plan for Peace on Earth....
The UN ended that deal...
Trump who idolizes Patton and McArthur will smooth things out while he is in charge...
If "they" don't kill him first....
Since we have the most OIL and Gas on Earth......shut off all imports... simple....
Trump will have his buddy Putin Nuke the Middle East.. then our OIL and GAS problems
will cease to exist.... :)
Seems logical to me.....
But then again im pretty dumb on these things....
Trump/Cruz
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Permalink Reply by william Allen. Ladd on
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That's right George. Vote Trump and have every bit of your dark side including very personal bathroom and bedroom activities exposed to the world!
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Permalink Reply by J W Newman on
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Business is business and we need someone like Trump as President! He can't be or hopefully will never be as as the one we have now in the White House! Surprised they haven't required a name change for the White House as being racist?? Trump is running for the right reasons (and paying for his own campaign).
It all comes down to economics.......what are E & P companies' finding costs to get that 1 mcf natural gas or 1 bbl. of oil out of the ground. In the US Shale Plays the finding costs are very high. While land/drilling/completion costs have come down in past 10 months, the economy in a capitalistic system will adjust. That's what we are seeing now! I'm no expert but consider (overall avg.) "finding costs" of between $50-$70 p/bbl oil in US Shale Plays vs. $0.10-$0.25 p/bbl oil finding costs in the Middle East. Middle East countries have have huge reserve bases while we have quickly declining shale reservoirs in the US. Problem is the E & P oil companies have gone crazy in capital spending (and thus borrowing) and those same oil companies are now in financial trouble. The huge drop in product prices are the result of all the excess products on the market which has reduced companies' cash flow (to service their debt). An old former Enron employee once said....."one of these days the bean counters are going to show up with the bad news". Guess what? Same story in 2015-2016!
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Permalink Reply by william Allen. Ladd on
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In my last posting, I was only trying to simplify things.
If you are constantly looking over your shoulder, you cannot see what is ahead of you! Try driving down the road by only looking in the rear view mirror. How far do you expect to get?
In the last few years there have been a few very "well to do" people who have promised to improve their town or services. Other folks believed in them and what they said they would or could do.
Now they are in jail because of unlawful or at least very shady practices. Many folks who believed in their words and supported them financially are now practically destitute. If not destitute, then at least they are wondering just how they could be taken in by flowery words. But then it might be way to late salvage anything at all.
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Permalink Reply by Joseph-Ohio on
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of course we have to look forward.
i find many times i have to look back over my shoulder too - so i tell my friends i think it's a smart thing to do these days.
we should look left and right as well.
long and short of it, i think we all need to be as cautious and aware as we can - 24, 7, 365.
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Permalink Reply by william Allen. Ladd on
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Exactly right.
A level of understanding and trust is needed too! Once we can acquire that "Understanding" of different cultures and they also understand us, and a level of "trust" can be acquired by all then the peoples of the earth can move on to better conditions for everyone!
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Permalink Reply by Joseph-Ohio on
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readin' ya' loud and clear neighbor.
just the same, thinkin' peace on earth ain't gonna happen.
simply impossible.
so.........i'll settle for as much of it as i can find.
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