Why Aren't Oil Companies Drilling?

[RamboLiberal]

Source: CBS News

(CBS) It was the battle hymn of the Republican National Convention last summer: "Drill baby, drill."

With gas prices soaring to $4 or more a gallon, the call for off-shore oil drilling in places previously off-limits hit a fever pitch, reports CBS News chief investigative reporter Armen Keteyian.

But despite making record profits, today, oil companies are drilling on less than one-third of the acreage in this country that they have the rights to.

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"The leases aren't being used because there's probably no oil there," said Felmi, the chief economist with the American Petroleum Institute.

A recent U.S. Government Accountability Office report suggests otherwise. Bottom line: oil companies only "develop leases when it is most profitable to do so."


Read more: http://www.cbsnews.com/stories/2009/04/13/eveningnews/main4942490.shtml?tag=topStory;topStoryHeadline

[dysfunctional press]

1. $50/bbl.

that's why.

[Javaman]

20. right on the nose.

energy in on energy out.

[poboyross]

2. Erm.....

"The leases aren't being used because there's probably no oil there," said Felmi, the chief economist with the American Petroleum Institute.

A recent U.S. Government Accountability Office report suggests otherwise. Bottom line: oil companies only "develop leases when it is most profitable to do so."

I know people like to completely demonize the oil companies because of their product, but the author is saying his last statement as if it's a horror too vile to truly comprehend. Like any other business, why would they develop leases when it *isn't* the most profitable to do so? I guess perhaps they think that oil companies, or any company for that matter, has a duty to give away money or not take the easy options first? I know for a fact that there was price gouging going on during the oil "shortage", and no one wanted to get to the bottom of it, but from an objective point of view on this article....I'm thinking "So what?" I'm a freelancer, and I make a decent living at it. I turn down work that I used to take on all the time because the new work is better and the clients are much easier to deal with. I would only turn back to those other contracts if I absolutely had to do so. Those guys that I left behind may be in a bind, but that's kind of tough for them, I have concerns greater than their well being when it comes to my business. I'd like to keep *my* business growing and continue to prosper. Not saying I love how the oil companies have handled things, I'm just saying that I wished I had invested in oil 3 years ago and got out last year!

[spag68]

8. oil leases

If there is no oil there then they should give up said leases. Then when and if they desire to drill on them anyway, negotiate new leases. What about the leases in the gulf that they pay no royalties on? You have a hard time ahead defending oil companies. They have scammed us for 100 years and now were supposed to feel sorry that hey might only make 8 or 10 billion instead of 40 billion. We can do better and oil is the worst way to go. Some of us here have pv certificates and experience in the field so don't give up the crap that we need to drill more because alternatives are not ready. that is a bunch of bullpucky and many know it. we in this country have subsidized energy forever going back at least to
Rockefeller, so save your breath.

[ladywnch]

9. If there was no/nominal oil in these lease lands why do they pay

good money for those leases? Last time I sat in on those lease auctions I didn't see any guns pointed at the oil companies forcing them to bid/buy.

[hack89]

14. Nominal is a relative term

every potential oil field has a price per barrel point where it becomes worthwhile to extract the oil. With oil prices going down it makes perfect sense that leases are more likely now to be below that required price per barrel. When the price goes back up next year, next decade, what ever, then the lease will be developed.

[poboyross]

15. You just summarized

what it took me twice as many words to say. :) Some folks can't separate analyzing a logical business practice with their disdain of Big Oil. Never mind the fact that I already stated that I don't trust them to any large extent.

For the record, I own a hybrid....however, I still *love* the idea of having a classic Chevy roadster with a big block and a 4 barrel. There's nothing wrong with power, and until they figure out a way to squeeze *that* out of a battery, I'll never be completely on board or impressed. Just try and get my gas/electric 4 beater through the mud in a field.....good luck!

[Uben]

16. Just a few years ago......

One of the kids I grew up with is now an oil producer. He said if they could get oil to stabilize at around $20/bbl, they would start drilling again. I have noticed that all of his wells have been pumping non-stop for the last two years. He grabbed up leases from the major oil companies when they started abandoning leases back in the eighties. Wells that once only pumped 6-10 bbls a day.
He would shoot new zones in search for better production. His dad owned a perforating and logging company here for thirty years, so he has the logs on all production zones. He has made millions!

[ladywnch]

21. then quit whinning about the need to 'drill baby drill'

drilling clearly has nothing to do with it.

[hack89]

23. Logic devoid appeals to our emotions are a part of our political process

'drill baby drill' and 'lets ban assault weapons' are two good examples. I was just pointing out that there is some economic logic behind the rhetoric.

[ladywnch]

24. I apologize, my last comment was not directed at you personally

.....it just pisses me off.

[corruptmewithpower]

3. I don't see the point in restricting the oil companies drilling to the point we

do. We need energy while we switch to better long term power sources.

[stillcool]

4. Restrictions? The Oil Companies..

are multi-national corporations. Do you think that people that live in areas where they drill pay less for oil? These corporations have no allegiances to any country.

[jmowreader]

13. I think they actually pay MORE for their fuel

Check out this map...http://gasbuddy.com/gb_gastemperaturemap.aspx

North Carolina, which has very little gasoline production, is currently lower than Pennsylvania, which has a lot of oil production.

[pocoloco]

5. LOL

Give 'em $100 a barrel and watch how fast they get rigged back up.

[dweller]

6. why don't we give them $1 a barrel

and tell them to get lost?

invest the other $99 in alternatives, and move on?
dp

[Lint Head]

7. Because it doesn't matter. Owning oil leases and drilling rights is power.

Power is more seductive than money. Not a single new well has been drill yet the oil prices went down. The economy is nothing more than an excuse not the real reason.

This tells the entire story.

[spag68]

10. lint head

Please, I'm begging you, stop showing that picture. Now I will be up another two or three hours trying to flush it out of my mind.

[Michigan-Arizona]

11. I so agree!

That has to be one of the most disgusting picture's floating around the web. lol

[Baby Snooks]

12. It's all about the money, honey....

One advantage to this is that the majority of the rabid Republicans aren't getting those nice big checks from the oil companies for their oil royalties on the land the oil companies ARE drilling on and so they aren't writing those nice big checks to the Republican Party.

[safeinOhio]

18. It is about the $

Oil company stock price reflect "known reserves". That small amount, that they claim is zero, shows up as "know reserves" on Wall Street.

[harun]

17. Why would the oil companies want to increase supply and lower the cost?

(a rhetorical question)

[hunter]

19. Remember when your $100,000 home was worth $500,000? Oil reserves are like that.

The oil companies are still pretending they live in a $500,000 home. If they actually had to sell the home they'd have to admit they live in a $100,000 home (or less...) and that would greatly upset their shareholders.

A much bigger problem is that oil is such a huge part of our economy that the actual physical costs of extracting the oil directly influence overall economic activity and productivity. If a person has to work more hours for the simple necessities of life, they will have less to spend on other things. If an economy has to work harder to extract fossil fuels, there will be fewer resources available for other economic activities.

If you think of our present economy as a biological organism, fossil fuels are what that organism eats. Fossil fuels used to be easy to extract. We drill a simple hole in the ground and oil and gas spill out. We dig a simple hole in the ground and high quality coal is as abundant as dirt.

Now we have to go to great extremes to extract fossil fuels. We get excited when we find new "reserves" using very extreme and expensive technologies such as mountain top removal, ultra deep water drilling, or tar sands extraction.

Unfortunately these technologies are so expensive they can never support an economic organism adapted to an environment of easy to extract fossil fuels. Our economy is following an evolutionary pathway of insular dwarfism. The fossil fuel eating economic mammoths are shrinking and things are never going to be the same again.

[Terry in Austin]

22. Insular dwarfism

The evolutionary analysis is spot on... "fossil fuels are what that organism eats." Perfect!

:fistbump: