Just wondering, by how many cents would you estimate that gasoline prices at the pump would drop if the entire continental shelf was opened to oil drilling?
Moreover, how much more would the price at the pump drop in that scenario than if current leaseholders merely drilled on the 68 million acres of oil and gas leases already granted on Federal lands which stand unused?
When would such savings be realized, and would that date come earlier than, say, the development of a domestically produced hydrogen-powered alternative vehicle?
Finally, how do you expect companies to come up with the intensive capital investment such an overwhelming increase in domestic drilling would require while lowering prices?
Please post your answers in the comments thread below. Feel free to have someone spell the words for you.
Posts
31 comments/complaints:
"These lawmakers ask why oil and gas companies want more access to federal lands to drill if they aren't using all of the 68 million acres they already have? Anyone with even the most basic understanding of how oil and natural gas are produced – and this should include many members of Congress – knows that claims of "idle" leases are a diversionary feint."
Read more on "idle" leases here.
Think you might mention that the author of that article is the CEO of the American Petroleum Institute?
In other news, American Tobacco Institute extolls health benefits of cigars.
Are you saying he's lying?
DFL,
If you have any understanding of supply and demand, global markets, and futures markets, then you can answer your own questions.
Oil, gas? Who cares!
Here's some real news.
http://www.nationalenquirer.com/sen_john_edwards_caught_with_mistress_and_love_child_in_la_hotel/celebrity/65193
LOL Murali...they were right about Jesse Jackson's love child right?
Here's a better question: why are the oil companies using their record profits to buy back their own shares rather than investing it in new technology or in looking for new oil fields?
Can't figure it out? Let me help. They are doing that because it will drive up the cost of oil. It will (continue to) limit production because the supply is limited. These companies are not stupid, obviously, and they are far from benign, too. Oh, and who has major ties to big oil? That's right, Dubya and Cheney. Big surprise there.
Here's your answer:
In a business climate where productivity is stifled, it's the only way to reward shareholders. Shareholders, I'm sure you've heard of those.
As far as 'looking for new oil
fields' that work has been done, and productive fields have been identified. Why invest in identifying more fields when you can't exploit the ones you've already qualified? It is now a function of drilling those 'fertile' fields, and creating the refining capacity to handle new oil production.
Any more questions?
yeah, joaquin, why aren;t they drilling? Surely some of those 68 MILLION acres have oil.
The US isn't the only country in which they have potential oil fields to exploit. Your answer is so bassackwards, joaquin, that I don't know where to begin. But I'll try:
While the rest of us are indeed experiencing this poor economy, oil companies are experiencing record profits. Their shareholders are being rewarded already. What they are doing is actually called purchasing shares from shareholders (I know this because they said "we are purchasing shares of our companies back from interested shareholders"), which is not really a reward. As for the rest of your post, I am not talking about fields in the US, as I mentioned above, but fields worldwide. And, developing new technology to is not contingent on anything other than putting $ into R&D. They definitely have the money. And, if we are to believe you, the idle time on their hands. Since they can't drill where they want to here, you know.
Yeah, you would think that a drop could be extracted from those 68 million acres that are leased. Then again, I'm not a geologist..... but I did stay at a Holiday Inn Express last week!
I'm sure it's because the oil drillers haven't gotten that secret-coded-greenlight-baby go drill message from the Oval Office.
No, joaquin - it is MORE PROFITABLE to allow them to remain idle, or to drill in Nigeria/Saudi/UAE than it is to drill domestically.
If the domestic fields were profitable, they'd probably drill. Which is why it makes no sense to lift the ban on ecologically sensitive areas now on the justification that it will somehow lower oil prices.
It won't.
Let me get this straight, SAPP.
Company A has 30 million shares outstanding (publicly held)
Company A announces that they are going to buy-back 10 million shares. According to you, the value of the outstanding shares, which is now 20 million, don't increase in value and the stockholders aren't rewarded. Really!
Does Company A do this for giggles? No!
Company A knows that by buying back stock, with excess capital, the stock they are buying back, along with all outstanding shares, will immediately be worth more. Do you think they are interested in acquiring a depreciating asset? I don't think so.
The only other reason a company buys back it's own stock is if they are planning to go private, which is widely being discussed in the oil industry.
I am always amazed at the LibDem desire to drill everywhere.....but here.
In one breath they preach anti-imperialism, and rile against American influence abroad, then quickly turn around and become the typical UGLY AMERICAN.
We can't drill here due to the risk to the environment, but drill away and screw those folks in the Third World. Nice!
They preach about the dangers of oil tankers, but have no problem with shipping oil halfway around the world.........because we can't drill here. Again, screw the Third World folks.
Company A did NOT buy shares back out of the goodness of their hearts, to "reward the shareholders" as you say. They did it because they have more money than ever laying around and they want those shares, and the control that inherently goes with them, back under their thumb. It amazes me that people can believe that an oil company that made record profits during a time of record prices for gas would be thinking about ANYBODY but themselves when they do anything.
To summarize, joaquin thinks oil companies said "man, these share holders are great, let's reward them for sitting on their asses making money that could have been ours had we not sold them those damn shares. We'll do it because they DESERVE a some extra change in their pockets, not because we want to earn even MORE money after we get our shares back". Riiiiggghhht.
It's obvious you decided to ignore the financial facts I presented about stock buy-back, or simple economics is a foreign subject to you.
Exhibit A.
SAPP said:
"man, these share holders are great, let's reward them for sitting on their asses making money that could have been ours had we not sold them those damn shares"
Econ. 101 teaches us that shares are sold to RAISE CAPITAL and are not disposable company assets. Shareholders are placing THEIR capital at risk, basically intelligent-gambling on the future of a company. If you consider that "sitting on their asses" so be it.
Exhibit B.
SAPP said:
"It amazes me that people can believe that an oil company that made record profits during a time of record prices for gas would be thinking about ANYBODY but themselves when they do anything"
A 'oil' corporation is not an entity floating in space owned by a couple of guys in dark suits. It is an entity owned by millions of shareholders that have placed capital at risk, and can 'pull' that capital at any time.
Look, when it comes to discussions like these, you can't let emotions drive you. I'm sure that if Apple were to announce a stock buy-back today based on their obscene Iphone/Imac profits, you would cast a completely different light on the subject. Come on.......you know I'm right.
No, joaquin, I think it is pretty obvious that I believe you are wrong. I didn't do all of that typing just to waste away the day.
And, to go a little further, you are using an economic theory to ascribe a motive to a company. That theory describes what can happen in the market when company A buys back stock. What it does NOT describe is WHY company A bought back the stock. It is a classic debate technique, often employed by those who have no ground for their argument and wish to switch the context of the debate to suit their argument better.
Your argument also has NOTHING to do with my original post. The record profits could be put to much better use (i.e. better refining technology, the discovery of new oil fields, the stepped up drilling in existing oil fields), but are, instead, being used to buy back stock.
And again, the oil companies are NOT trying to reward the share holders. They don't do anything at all unless there is something in it for them. They don't want to help the little guy, they want more of the record profits.
"And again, the oil companies are NOT trying to reward the share holders. They don't do anything at all unless there is something in it for them. They don't want to help the little guy, they want more of the record profits"
Breathlessly clueless, and ignorant with more emotion thrown in for good measure, is the only way I can describe your last post.
Any additional commentary on this topic from me, would have to include a tuition invoice.
Or, or...and I'm just spit balling here...or, you could just admit that you have no rebuttal to my original point, that the rebuttal you DID provide is not based in the reality of the facts, and that rather than continue with the pitiful farce of an argument that you have perpetrated to this point, you are giving up and moving on to your NEXT disinformation campaign.
And SPP discovers what we've been dealing with for four years on this blog. These guys just like to argue. You won't convince them, and when you do, they change the subject . . . LOOK! CLINTON'S PENIS!!
http://www.investopedia.com/articles/02/041702.asp
"There are a number of ways in which a company can return wealth to its shareholders. Although stock price appreciation and dividends are the two most common ways of doing this, there are other useful, and often overlooked, ways for companies to share their wealth with investors. In this article, we will look at one of those overlooked methods: share buybacks. We’ll go through the mechanics of a share buyback and what it means for investors"
Read the article, learn something, and have a nice weekend. I KNOW I AM!
You are missing the point entirely. These companies are NOT buying back shares simply to reward share holders. Yes, share holders will reap benefits from the buyback, but that is an unintended consequence, and not the main goal, of the buyback. You are putting forth the idea that these companies are doing this out of the goodness of their hearts as a reward to loyal share holders, and I reject that notion entirely. If they REALLY wanted to be generous for the sake of being generous, they would send gas cards out to share holders and let them keep the buyback shares, because the value of the shares is only going to go up.
Any idiot can open a book and toss out a quote from it. To really get your point across, it is best if you UNDERSTAND what you are quoting, and can then relate what you read to the situation with relative points. I could give you a link to an article about cloning sheep, it doesn't mean I understand it a lick, or that I could argue any points about it in a meaningful way with you.
SPP,
First, let me give you my background. I have a BA in Economics, spent 18 years as a Financial Consultant working in the investment markets, and am now in the oil and gas industry. I work for a company that does land acquisition for, among other things, oil and gas pipelines. My company is currently contracted to a major natural gas company and I'm currently on a project in Texas.
Second, the client company has had stock buybacks and have increased their dividend 13 times since 03. Total dividend increase is 258%. The company stock price has increased 237% during this time. Yes I know factors other then the dividend and buybacks contributed to the price increase. I bet these shareholders are pretty happy.
Third, why then is this company expanding its capacity at break-neck speed? I am paying double and triple the price for right of way easements that were paid by other companies a year ago. Why would this company be spending money out their ass to deliver product you say they don't want on the market. Next week I will be cutting a check to a landowner for over $1,000,000. A year ago, I could have bought the easement for $460,000.
In summary, can a company reward shareholders and expand its supply capability at the same time? I know they can and are doing it.
Again, investors being rewarded is an unintended consequence of the oil companies mad dash to buy back their stocks, not the driving reason behind the buyback, as joaquin is asserting.
Thank you for your insight. I have to ask if you think those easements cost so much more now because the people selling know that oil companies are making record profits right now, and the sellers want to take full advantage of that. Or, if the sellers need to recoup the ever increasing cost of petroleum products. Or both, or neither.
SPP,
The driving factor is supply and demand. There is a large supply of natural gas here and companies are racing to get it on the market. I'll use my $1,000,000 case as an example. I began informal negotiations a year ago. The owner had been paid X for an easement a year or so prior. My informal offer was X plus 10%. As you can imagine, we are crossing a long distance and will be the most extensive line on this property. Because of the complexity, it took a year to work out the route, survey, and engineer the line. In addition, we had to overcome some environmental and archeological hurdles. By the time I was ready to make a formal offer, two other companies had negotiated and acquired easements at much higher prices. As you remember, my informal offer was X plus 10%. Let's now call that offer Y. Company A paid Y plus 12%. Company B then paid Y plus 80%. I had to match company B. You may ask why don't we just condemn. We will in some cases, but where possible we want to avoid the delays to construction brought about by a lengthy condemnation process. We are also under contract with suppliers to get the product flowing by a set date. They are very eager to get it to market.
Therefore, I assert the notion that energy companies are sitting on supply to keep the price up is plain silly.
Just to clarify, I do NOT think the oil companies have hidden stockpiles that they are sitting on to artificially drive prices up. I think that they should take those record profits and put them towards the exploration and drilling of new fields, and the development of new technology, not on stock buybacks.
SPP,
This comment of yours seems to indicate that you are saying they're not drilling to drive the price up.
"Here's a better question: why are the oil companies using their record profits to buy back their own shares rather than investing it in new technology or in looking for new oil fields?
Can't figure it out? Let me help. They are doing that because it will drive up the cost of oil. It will (continue to) limit production because the supply is limited. These companies are not stupid, obviously, and they are far from benign, too. Oh, and who has major ties to big oil? That's right, Dubya and Cheney. Big surprise there."
I'm saying that they are not looking for new supply, and that is one of the factors that is driving the cost up.
SPP,
Based on the experiences I've shared with you, they ARE looking for supply.
You may find this an interesting read.
SPP,
A couple of things from the link I referenced above.
"In 2005–2007 horizontal drilling in the Barnett Shale extended south into Johnson, Hill, and Bosque counties, with a 100 percent success rate on completed wells."
"According to Jim Fuquay of the Fort Worth Star-Telegram, over 100,000 new leases were recorded in Tarrant County in 2007."
Does anyone else want to participate in this discussion, or is it just me and SPP? The more the merrier.
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