This is a pretty standard business report from Reuters. It points out that drilling for gas has dropped off a lot since the price of gas is so low and the wells that are currently producing are meeting the markets' needs.

It also points out that drilling for oil and NGL is continuing on since there is money to be made at current prices.

Most oil people know that 50% of the oil ever discovered is still in the ground. All that is necessary to get it out is some new way to get it out. This is sometimes called 'secondary recovery' but most oil producers look at it as drilling an old prospect in a new way that gets to the remaining deposits.

There are ways to recover oil. Steam flooding, CO 2 injection, etc.... But none work as good as drilling a new well and hitting the existing pay zone deposits.

In any case... I hear the Saudis are none too happy with the drilling that is taking place in the US and are saying they might cut production to drive the price of oil to $85 a bbl. and keep it there. They are welcome to do this as it will do nothing but keep the price of oil stable for years to come. Even if Iran cuts off 100% of their exports, also known as cutting off their nose to spite their face, the Saudis could take up the slack in about three days.

I buy a lot of gasoline because I love to travel by car, so stable and lower prices are fine by me!

UPDATE 1-U.S. natgas rig count slips 1 to 353 -Baker Hughes | Reuters

Of course, then the talking Fedheads starting with Ben will start quacking about deflation or low inflation and how that's baaaad, baaaaad!

Though personally, I'd be all over $10/gal gas. Time for the American public to be slapped into abandoning toxic fossil fuels. Much as I'm disgusted with the Gulf disaster's pollution in 2010, I wouldn't mind seeing something like that happen off the CA coast in 2014. Maybe having it happing in an "important" place like CA rather than in the South, would wake the dumb American public up and cause them to seriously get behind clean alternatives like nuclear, hydro, and renewables once and for all.

California's gasoline prices will always differ from the rest of the country's just because of the pipeline systems in the US.

As far as I know there is currently only one pipeline running from California to Texas, and it drops off refined products all along the way. The reason for this is that there is a lot of oil in California and even more that can be sourced from Alaska and Canada via tanker.

But it all comes down to supply and demand. Our elected ones are always screaming about 'oil independence' and now that it is getting closer a lot of them are puzzled as to what to whine about next. But as long as the money is there people are going to drill for oil, and they are getting better at it all the time.

I used to hear oil producers carry on about 'restrictive drilling requirements' and blaming those for their lack of production. The reality was they were upset that they could not drill in some National Parks where they might have an edge due to who they knew, and therefore were forced to deal with landowners who wanted top dollar for their royalty. Finally they broke down and cut loose with some cash and secured some leases, but they still whine about how put upon they are although they cannot get rigs to drill with even if more public lands were opened up.

Um, what?

CA requires different formulations of gasoline than the other 49 states. It has nothing to do with pipelines and everything to do with meeting the state's demands for "cleaner" burning gasoline.

When Chevron had the refinery fire last year it drove up prices because there wasn't enough capacity in the rest of the system to handle the formulations required by law. There was plenty of "normal" supply, but because it has to be reformulated first, there were shortfalls and price increases.

As a side benefit to paying more for our specially-formulated gas, we also get less fuel economy from those formulations. It's a win-win!

Not.



I often wonder what the real net benefit is for the formulations. After all, if you burn more fuel to go the same distance, the "cleaner" fuels would have to be lots cleaner to offset the extra fuel burned.

The nanny state mentality rules, though.

In the 1970’s in some parts of CA you really didn’t breathe the air you chewed it. LA basin Sacramento valley etc… Another problem was Bakersfield crude is a ***** to refine, North Sea or Saudi honey it is not. We actually had school closures due to smog. For the five to fifteen cents over the national average I'll live with it.

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I used to deal with crude from Kern County with a gravity of 13. This was some thick stuff, or high viscosity if you want to get all techy.

Nothing like Brent or Arab Light, but then we got it cheap so we could make out on it even at the higher cost of refining.

Transportation of this stuff is tough since it has to be heated to keep from turning solid. It is a lot like tar in looks and viscosity when it is cold, but it is far higher in quality since it is real crude.

If the EPA or the CARB did not breath down our backs 24/7 everyone would still be producing the lung clogging blends you remember. The only way to provide for the common good in an industry like that is for everyone to be forced to play by the same rules.

The cost of living in California is high, but as far as I am concerned it is worth it and the higher the quality of life one has the more it normally costs.

Nope.

California has higher prices because of logistics. Any special formulas are the same for all refineries and to pump up the O2 level all you have to do is inject more Ethanol. Ethanol that must be trucked in or delivered by rail from the Midwest.

And supplies are always tight when the RVP must be changed to reduce evaporation. Any disruption in the system will cause a price rise, but it will always be short lived.

This is really too complicated to go into in just a short space. I spent over 30 years dealing with just this sort of thing, so perhaps this is all so second nature to me I just don't do that good a job of explaining it.

"our elected ones" are servents to their paymasters. and energy independence is a scam term used by the masters and the servents to dupe us into thinking what they want. If there ever is a surplus-- the autonomos - thinking always of the USA masters- just instantly transform into free traders and sell off the "independence" for the highest buck -- thats the only thing the trans canada pipeline is about, it just running down to export terminals in Port Arthur and Galina Park east of Houston.
Its just another big conn job.
if it were actually true-- There would be industries sprun up everywhere right now to convert vehicles to run on cng and lpg AND a regular propane tank for older cars, and America could get away from gasoline if they choosed, and there could actually be a tangable benifit for fracing and riuining the environment , and ruining ground water----
Well No, there is really no benifit for doing this no matter if we could have another fuel.

If the Saudi's or any producer cut production, it would drive prices higher not lower as oil currently is around ninety seven dollars per bbl.

And there there is reality.

If the Saudi's cut production the other OPEC members could replace it in less than an hour. Everyone is currently producing less than they are capable of. If the Saudi's cut their production to zero it would impact the market for about 48 hours since that's how long it would take for those not in the business to understand what they are really dealing with.

Oil will soon hit $85 a bbl., and it will stay there unless it goes lower.

You do not understand just how much oil is currently out there looking for a buyer.

By the way...

Spot price is currently $97 a bbl. That is if you need oil today.

The future price of oil is right at $85 a bbl and it drops off quite a bit after that.

This is because in the future Brazil will come on-line with a new field at the mouth of the Amazon that some folks think will crash the price of oil.

Trick stuff, but it all points to a great outlook for anyone who loves to drive!

^^^

I rather like to drive (for pleasure trips, not commuting). But if higher oil prices make people drive more and live further from home, this just means more traffic for me.

Cheap oil also makes people forget the lessons of the 70s, 80s, and mid-2000s, and move away from efficiency. Then when the next oil shock comes, it hits the economy hard.

Back during the last run up in price (3 years ago?) I recall reading an interview with a Saudi prince or king and he said oil should currently (then) be, as you say, $85 per barrel. At the time, iirc, it was around $105 maybe?

Every product bought and sold and transported is affected by energy prices. If petroleum goes up then there is pressure on everybody to recoup the energy expense by passing increases to consumers.

The reverse trend is damped by profit-making as energy prices descend. But eventually price wars will result in falling prices if the differential is great enough.

As a soon-to-be retiree who is counting on his 401K, I LIKE the idea of bigger profit margins on falling energy. We coupon-clipping, dividend-cashing capitalist fatcats like profits.

Guess you don't have any kids or nephews since you're so into your profits at the expense of the environment. Ever thought that things change, and that our economy doesn't have to be fossil-fuel based forever -- it can still be successful even after fossil fuels go the way of horse poop on the streets? And frankly, if our economy became more dependent on knowledge and leisure rather than shipment of shoddily made tchotchkes from the 3rd world, it wouldn't be so bad either.

BTW- if you hadn't been a lemming, your 401k could have done just fine with alternative-energy stocks -- look what's happened to SPWR and FSLR in the past six months. I was lucky enough to buy SPWR at under $5, and it's now over $20.

Think beyond gas cars and about electric cars and trucks, powered by nuclear and renewables.
Think about homes that are 95% electric powered, from clean energy made by nukes and renewables.
Think about localized, heavily-automated manufacturing vs shipping crap made by slope kids paid $1/hr halfway around the globe.
Think about different patterns of development, where more people will be able to walk to what they need without living in a major city.

Why is the 1950s paradigm created by Robert Moses and his ilk automagically the right one?