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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: jim_p who wrote (23840)6/16/2003 6:25:39 PM
From: Ed Ajootian  Read Replies (1) of 206203
 
Jim_p, Trying to reconcile your discription of natty prices with the linked graph oilnergy.com

This graph does not show any spike in the late 70's. It went over $2.50 for a few years in the 80's, but never close to $5. What am I missing?

3 other points in defense that it _is different now than the 70's:

1) Depletion rates are significantly higher than they were then, which forces more wells to be drilled to get the same amount of production.

2) F&D costs per mcf are much higher now than they were then, which supports the view that there are fewer good prospects.

3) 3D seismic was not around in the 70's but has been around now for more than a decade. When this first came out it lowered F&D costs and that is what allowed natgas prices to stay low. But now even with 3D seismic F&D costs are going up. Unless the scientists can come up with some new breakthrough in technology that can further improve the likelihood of finding hydrocarbons when you drill a hole, it only gets worse from here.

$3 gas may well come back, but only as a short-term response to a previous overreaction to previous high prices. We have no OPEC to control producers here in the US and that, together with the fast decline rates, sets us up for inevitable booms and busts. IMO the step change to $4 gas has definitely been made. The jury is still out whether $5 is now the base, IMO.
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