Oils Well That Ends Well
Oil production is booming - no thanks to Biden's energy policy. Under Biden's central planning policies, auto manufacturers are racing headlong into electric cars that nobody is buying.
We are beginning to see several reports in the media about the current oil “boom” and how the US is on track to produce more oil this year than ever before.
Biden will likely take credit for it. Karine Dust Mop Pierre will take the podium and give credit to Bidenomics or something. Doesn’t matter he has done pretty much everything to fulfill his campaign promise of ending the hydrocarbon extraction and refining industries, he knows that even Democrats like lower prices at the pump and that cheaper energy makes everything less expensive – Bidenomics fights inflation!
All of that is true, except for the part where Joe “Asshole” Biden or “Bidenomics” had anything to do with any of it.
As a matter of fact, Biden’s government is seducing auto companies to build EVs and discontinue the internal combustion engine as fast as they can - but there is a problem. According to Rob Stumpf at The Drive, an industry newsletter:
[Auto] companies have invested hundreds of billions of dollars into battery plants, R&D, tooling, and marketing. There's just one problem: EVs aren't selling nearly as fast as they can be produced.
A new study by Cox Automotive shows that dealerships across the U.S. are sitting on a significant number of brand-new electric cars. As it turns out, automakers are really good at building new cars at volume—who could have guessed? They're so good, in fact, that the supply of new EVs has outpaced the current demand way ahead of schedule.
There is also the issue of how to repair the batteries on an EV.
Several studies have shown that a collision requiring a $2000 repair on an internal combustion engine vehicle could cost as much as $25,000 on an EV if the battery is damaged.
Hydrocarbons are still the way to go, no matter what the geniuses in the Biden administration think.
What has happened is the oil and gas industry is commonplace these days – they got hit and instead of going down for the count, they got smarter. They used technology and unconventional techniques to increase recovery from assets they already have.
This is an industry that got caught wit their pants down in 2008-2010 when the mortgage bubble had burst and worldwide demand fell in record-breaking time. Oil futures went negative, meaning that somebody holding contracts had to pay you to take the oil. Price at the wellhead went to $16 a barrel when it cost nearly $40 to produce.
That gave birth to a new perspective – IOR was born.
IOR stands for Increased Oil Recovery – finding ways to get more from existing wells and acreage already under lease. Fracking, directional drilling, water, steam, and CO2 injection to force more oil out became the order of the day and that change opened huge reserves of natural gas and crude oil that once were too expensive to produce.
One thing most people don’t know is that the Energy Information Agency estimates that when a field is “depleted”, close to 40% of the reserves are still in the ground and in some areas, like the tight formations in the western segments of the Permian Basin, extraction rates are around 10% of what is there.
Geology makes things challenging at times, oil doesn’t pool in massive caves like is shown in some textbooks, it saturates fissures and gaps in permeable rock strata, trapped between layers of impermeable layers of granite and other forms of igneous rock. Some of the fissures are so tight, not even natural gas can escape. Fracking consists of using hydraulic pressure to force the fissures open, then holding them open with tiny, spherical grains of sand.
The Wall Street Journal reports:
Production improvements since 2014 have pushed down the cost of drilling and fracking in the U.S. shale patch by 36%, according to J.P. Morgan, even as recovered oil volumes have increased.
Frackers have found ways to force more water and sand into rocks and create more oil-freeing fissures. ConocoPhillips said its planned wells this year will be 14% longer than those it drilled last year. Another major producer, EOG Resources, said it bored a well over 5 miles deep and nearly 3 miles long in South Texas early this year—a record length for the company.
Just imagine the complexity of drilling down five miles, then turning the bit ninety degrees and drilling several “spokes”, radiating horizontally for another three miles each. The horizontal part is the most significant because it cuts across the fissures and gives the oil a place to collect.
All this has a geopolitical impact as well. Analysts who know Saudi oil policy have said the Saudi government’s budget requires an estimated $81 a barrel. Right now, Brent crude is trading around $76 a barrel, down 13% from the start of the year and the price curve is trending the wrong direction for the OPEC assholes.
So, when gas prices fall, and they will, remember to hug someone who works on a rig or fracks for a living and just say no to Joe.
Oils well that ends well, one might say.
I'm wondering what will happen when the auto companies will have such a glut of unsold EV's? Will they continue to produce them with govt subsidy? Will the price on the lot of existing EV's plummet? What will happen to the price of gas-powered vehicles? Will Hybrids still be a thing? At what rate is battery technology improving, and at what cost $$$?
I am so praying for a new administration that cares more for the people than it does in lying to the people.
Is a "corner condition" to claim "a $2000 ICE collision repair could be $25,000 for an EV". A friend drove a BMW diesel over a rock in the road late at night in the rain. Punctured the crankcase. Being a good engineer he stopped immediately before the oil light came on. Saw the damage and oil puddle, called a tow truck. Insurance totaled the car for the loss of oil and myriad other things ripped on the undercarriage. Someone got a good engine on salvage needing only an oil pan.