Home Forums Hunting & Shooting Hunter's Campfire Who here really thinks domestic drilling lowers the price of oil/gas?

Not to be argumentative, your point about the oil market is correct. But there are fake markets. One example is the Carbon Credits market. A totally fake & useless product that would not exist if it were not for Gov't thugs.

Before answering your loaded question, I'd like to know what myths associated with this subject you intend on slaying.

There are areas of oil in the fracking zones (like the Eagle Ford), and there are areas of oil.

Gas prices are very low due to a glut of gas on the market now from all the wells. Little to no exportation of gas takes place because of the problem of compressing it for export.

What you are saying about oil being a by-product of gas production is exactly 180 degrees off.

There is lots of gas being produced as a by-product of oil exploration. Oil is the bread winner and money maker on the world market. Not gas. Gas is only used and consumed here. They are making progress in methods and infrastructure to export gas, but for now, there's a glut on the market.

Yes, it is "producible" at that price, but exploration will pretty much stop. They will produce the wells already in production, but with oil at $40 per barrel, even the major oil companies balk at paying in excess of $6 million to bring a new well online.

Major oil companies that are/were pushing 20 drilling rigs around the Eagle Ford, drilling one well after another will be reduced to only drilling the minimum requirements of the lease in order to keep their lease holdings intact until the OPEC folks let up. OPEC can't keep it up forever, and our guys know that.

But, in the meantime, a very good barometer would be looking at the rig count numbers for comparisons.

Eagle Ford Rig Count

http://eaglefordshale.com/drilling-rig-count/

We sold our ~100k acres earlier this year. Did the same with our
acreage in Kansas, Ohio and a portion in Colorado.

Well it�s not fake in the sense that it�s really happening. But if they shut down US fracking, do you think prices will stay that way for long? And if they don�t shut down US fracking, at some point these prices will hurt even Saudi Arabia. The market is �fake� because it doesn�t account for the cost of the underlying commodity. Which means at some point the price has to come back up, the question is just when. If you don�t think Saudi Arabia is manipulating the market, then I don�t know what to say.

Of course the Saudis are manipulating the market. The reason "why", is obvious, except apparently to you. It's their only play when it comes to stalling further increases in North American oil production.

I totally get that. But at some point oil will have to come back up to a level where they're making a profit. Selling below cost is creating an artificial market. Fracking is only making oil cheap because the Saudi's want to kill it. Once everything returns to normal, prices will be much higher with or without fracking. Fracking doesn't really affect world oil prices, but it does make us less dependent on the Middle East, and that's something the Saudi's don't want.

Exploration in the Appalachian Basn isn't going to slow (Marcellus & Utica Shales), at least much, in the core areas due to the economics being very favorable in dry and wet gas/condensate areas. I think low prices now will be good for the long term, as it is going to weed out some of the operators that cannot control cost very well.

What areas in Ohio, out of curiosity?

They spend a fair amount of time on the Palin threads talking about oil.
Posted by M. Joseph Sheppard Friday, December 12, 2014
...
What is happening in oil at the present moment is quite complex with long lasting impacts that 99% of Americans find difficult to comprehend or see coming.

We are witnessing an historic drop in the price of oil. Most of us see it as a welcome relief at the gas pump. But there are more fundamental consequences to the global financial system and to the geopolitical balance of power in the world. And therefore to the U.S. economy and to U.S. national security.

These interconnections of oil and energy to the stability of the world economy and political stability and to our own economy, political stability and national security will shape the 2016 election cycle political discourse.

Linked here is a superb primer on the risks to us and to the world from falling oil prices. The 27 minute video lays out those risks in a way that most people can understand.
http://www.oftwominds.com/

A key threat is the loss of income to oil exporting states. Those countries like Saudi Arabia, Russia, Venezuela, Iran, the UK, Norway and others rely on oil income to subsidize daily life in their domestic economies and more importantly from our perspective to invest in financial assets. Falling oil prices drains liquidity out of the global financial markets.

Another threat stems from the Financialization of Oil. Oil and more specifically the income stream anticipated to flow from oil production undergirds a mighty superstructure of DEBT used to facilitate production. Oil is the collateral of a highly leveraged speculative pyramid. That collateral is now impaired. It's worth less in the ground and in the pipelines and in the storage tanks. It is worth less in the future.

Impaired collateral should send shivers down your back. Think 2008 and the Sub-Prime debacle. The oil business is reprising the real estate business. Everybody thought real estate could go only one way--up. Similarly, everybody BET that oil was going only one way--up.

The consequences of a break in the RE market in 2007/2008 were monumental because the collateral of the trade got severely impaired in value setting up a cascade of adverse consequences in the derivative markets which led to Lehman Brothers and massive government intervention into the financial markets which continues to this day.

We have not yet begun to see the consequences of the impairment of the collateral that supports trillions of dollars of leveraged investments related to the production and distribution of oil. But those consequences are going to be GIGANTIC perhaps surpassing the Sub Prime crisis in order of magnitude.

It's about those credit derivatives based on $100 oil. With oil at $68 and some saying on its way to $50 the debt is de-collateralized and imperiled. Somebody is going to get burned here. Guess who?

This really bothers me. "People" thought RE could only go up in spite of the fact that they knew Gov't was forcing banks to make bad loans and, with just a wink, promising to make good on those bad loans.

Now here we have what amounts to a bunch of Peak Oilers controlling the oil-credit market when it really didn't take any education beyond reading the newspaper to realize that Peak Oil was a bunch of horse schitt.

I can say these things because I have been right on both counts.

Why are we so prone to listening to idiots?

I bet that their enemies, Iran and Russia, suffering has a lot to do with their desire for lower oil prices.

Exactly, the better run companys will find ways to lower their so called break even costs to compete.