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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: BigBull who wrote (72766)9/9/2000 11:50:21 AM
From: ItsAllCyclical  Read Replies (1) of 95453
 
This article goes to the heart of why so many oil bears believe oil over $18-20 is not sustainable.

This Simmon article is relatively old (May 1999), but very relevent to our current discussion about where oil prices will/could settle. Since it was published near the turning point of oil prices I imagine many here have not read it.

simmonsco-intl.com

Why Oil Prices Need To Rise; The Illusions of Oilfield Costs
and Technology, published in the May 1999 issue of
Louisiana State University’s Oil, Gas & Energy Quarterly

I just read it for the first time myself and found it excellent. Even though I consider myself well informed I was also of the mistaken notion that these oil companies were able to find oil for $6/barrel and be profitable at $15. At least that's the impression the Majors give the general public.

When I look at these numbers I start to think $25 is far more sustainable than $15 (taking the long view).

Just like our productivity statistics these accounting tricks can be very dangerous. Each company wants to show the lowest finding costs, but as an industry they'd be better served showing the "true costs". If the true costs were more widely known and accepted then oil traders would be far less likely to take prices below $15 for any length of time. A catch-22 if you ask me.
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