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BA Deere
Honored Advisor

Where`s this oil price thingee headed?

I had always thought when oil price goes below C.O.P. the drillers shutdown.  According to this guy, oil drillers are no better than farmers...producing until the money spigot is shut off. 

 

http://wolfstreet.com/2014/11/13/how-low-can-the-price-of-oil-plunge/   

 

 

I supose like farmers, drillers all have different C.O.P.  ie, own cheap leases, produce a more sweet product, no debt, ect. 

 

My tinfoil hat theory the drop has to do with Saudi`s and punishing Putin.   But road diesel is sure different $4.05 in Minn and 30 miles south it`s $3.80.

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13 Replies
hardnox
Advisor

Re: Where`s this oil price thingee headed?

My SWAG is tht last night's poke to a 73 handle may have finished this leg.

 

Prolly another one down after a correction.

 

50's?,

 

May not have anything to put in the pipline they want to run through Ioway. Too bad you can't pipe ethanol.

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northnd
Senior Contributor

Re: Where`s this oil price thingee headed?

 

How it works in my area(northcentral North Dakota), as the price of crude drops the pumps slow down.  They are set on timers and if it gets to low they pull the plug on some wells and they sit idle until the price rises to a certain level.  So they now the exact breakeven and adjust production accordingly.  Exactly what WE should be doing as producers!!

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Shaggy98
Senior Advisor

Re: Where`s this oil price thingee headed?

You go on ahead and take the lead on that letting acres go unproductive northnd.  I'm not sure how your territory works, but my idle acres still have a COM (cost of maintenance).  Weeds still grow and Uncle Sam still wants his annual allowance.  How do we calculate "cost of abandonment" compared to COP and decide which is the better option?

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tree fmr
Advisor

Re: Where`s this oil price thingee headed?

If you lose less $ by going idle it is the thing to do. Dept free guys like Shaggy needs to keep producing to lose as many $ as the rest of us! LOL
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tree fmr
Advisor

Re: Where`s this oil price thingee headed?

We need to get uncle sam to wave taxes on idle and CRP acres.
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clayton58
Veteran Advisor

Re: Where`s this oil price thingee headed?

Cep I'm my area already pays more than dryland rental rates. And I many cases avoids SE tax. Landowners don't need more incentive to lick land out of production. Cep has really stifled a lot of small town rural economies. But back to oil isn't most of the cost sunk when the well is drilled? Seems to me the cost to operate after that would be fairly low
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clayton58
Veteran Advisor

Re: Where`s this oil price thingee headed?

Stupid spell check. I meant CRP
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tree fmr
Advisor

Re: Where`s this oil price thingee headed?

Back when we had a lot of CRP the small towns were booming when the pheasant hunters arrived.
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clayton58
Veteran Advisor

Re: Where`s this oil price thingee headed?

What about the rest of the year? Pheasant hunters don send there kids to your school