$50 oil want meet long term demand

Fuel Fix:
The CEO of oil giant Chevron Corp. said Friday that $50 crude oil wouldn’t be enough to meet the global economy’s longer-term energy needs.

Crude oil has fallen by more half since highs reached this summer as global supply has outpaced demand. But on fourth-quarter earnings call with investors, Chevron CEO John Watson said that long-term prices would have to be high enough to support the kinds of billion-dollar projects his company – and other majors – pursue.

For the quarter, the news was bleak: Chevron reported falling profits, slashed its budget and hinted at layoffs on the way. Longer-term, Watson was more optimistic for big oil.

“It’s very clear that the incremental barrels are coming for more complex developments over time,” Watson said. ”With all the enthusiasm around shale, I think it’s important to remember, it’s 4 million barrels a day out of a 92 million barrel base.”

The majority of the barrels produced still come from conventional fields, he said, many of which continue to decline each year.

“The 3-5 percent decline on a 90-plus million barrel-a-day base is significant, so you need investments in new fields,” he said. “And $50 does not support large, new-field developments.”

In the short run though, Watson indicated things would be painful until the crude markets are able to rebalance by bringing the supply of crude back into line with demand. The San Ramon, California-based company reported $3.47 billion or $1.85 per share in total net income Friday, down from $4.93 billion in the same period last year.
...
Before there was OPEC the Texas Railroad Commission set production quotas that stabilized the price of oil.  At this point the market is still going to set the price and that is going to require companies and in some cases countries to become more efficient.  With OPEC no longer able to control the price it appears to have a ceiling near the cost of production from shale wells.  It will proably stay there until demand increases.

Comments

Popular posts from this blog

Russia attacking Iranian forces in Syria

Shortly after Nancy Pelosi visited Laredo, Texas and shook hands with mayor of Nuevo Laredo this happened