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Aggie, Douglas, thanks for your response. The problem I can't figure out it this: Out of the 500+ rigs that were drilling for oil/gas, 370 of them were drilling for oil(aggie's 2/3rds number). We'll assume an average rig per day cost of say $60,000 (back then). I would think that the exploration companies revenues have to be at least $120,000 per day to support all the other overhead such as labor costs, materials, boats, transportation and profit.(My gut tells me this figure is way too low) But lets just say they need to make $120,000 per day. If the average cost of oil is $18, they need to produce 6,666 (120,000/18) barrels per day to make money. That means that since these rigs are no longer working 2,466,420 bpd of production (6,666 * 370 rigs) is no longer making it to the market. The non-opec production should be dropping like a rock! Then on top of this you have depletion. Can you tell me what is wrong with my thinking? |
