Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Broken_Clock who wrote (24435)	6/22/1998 7:16:00 AM
From: Jess Beltz	Read Replies (3) of 95453

Pappy, let me ask a question both naive and somewhat silly. What is the approximate cost of producing the "average" barrel of regular crude oil, or more precisely, if we were to take the arithmetic average of the costs of all of the barrels of oil produced today, what would that be? And now, the reason I ask is this: the prices of the drillers/explorers seem to rigidly track the price of oil. The correlation seems very high to me. Does the cost of a barrel provide a floor for the bottom of driller prices, since presumably, were oil to approach the price of production, supply would have to start to shrink, since no one has an incentive to produce a commodity that offers no profit? Your (and others) thoughts on this, and the likelihood of approaching that threshold (if it exists) as the Asian economies continue to contract. jess.

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