Future Oilfield

What does the future of the oilfield hold?  I’ll tell you, and it is going to be rosy.

First off, just because the world economies are crashing down around our ears, don’t think the oilfield is going with it.  It isn’t.  In college economics I learned that “prices are sticky downwards” which means that prices go up really easy, but down, not so much.  Oil and gas prices were sky high earlier this year, and yet they went way down quickly…that almost seems to disprove the basic economic tenet stated above.  It doesn’t.  Oil and gas prices are a commodity which are traded by brokers for daily, weekly and monthly profit.  Prices change daily.  They go up and they go down.  They seem to defy economics.  But unproduced oil and natural gas, which is to say is still in the ground and not pumped, is like money in the bank.  How would you feel if you could put $100 in the bank and then pull it out when it was worth $1000?  You’d like that.  So if that $100 was only worth $10 when you put it in the bank, and next week it was worth $150, you would probably sell sell sell.  You would, don’t say you wouldn’t.  This is how the oilfield works.  Lets say you knew where buried treasure was and you had $10,000 in the bank.  To get all the treasure out would cost millions and you can’t afford that, but you could get some of it.  Even if buried treasure was selling for a record low amount it would be nice to own the rights to it.  So you buy the rights to it, you start digging for it and you sell some here and there because you need to recoup your investment.  But you don’t really get serious about it until one day the prices for buried treasure go sky high, then you drill baby drill.  Or dig baby dig.  EIther way.  And that is why the oilfield will be ok.  Because unproduced oil is money in the bank.  Same with natural gas.  Once you have drilled for it, hooked it up to tanks and pipelines and paid that cost you are ready to profit when prices are high(er).  You drill now because next year it will cost more to drill the same well.  If things go really bad your oil company might have to hibernate a few years until it turns around, but thats ok….you are ready for the next pricing cycle.

So what does that have to do with the future?  Well, that is the past and the present and without understanding them, you have no grasp on the future.  The oil company’s will be allright.  They aren’t going anywhere.  In fact, in the future they will drill less, produce more, and profit greatly.  You see, the world is running out of fossil fuels.  Now, thats not to say we are running out of oil or methane or ethane or whatever, because we aren’t – we can make those on a daily basis – but fossil fuels which were produced by, we think, decayed plant and animal matter, we are going to eventually run out of.  Fifty years?  One thousand years?  Who really knows.  The oil companies and petroleum geologists are pretty good at estimating reserves and potential fields because of the experience they have garnered from past drilling operations, but they don’t know.  Don’t get me wrong, they have a pretty good idea, but they can’t be for sure.

The future of fossil fuels?  We don’t burn it for heating or driving.  We use it for making plastics, fertilizer, and things that it does well but for driving and heating and cooling our homes we use wind and solar.  Thats really a no brainer, but to listen to all the discussion you wouldn’t think so.  By the time we don’t need to use oil and gas for transportation there will be little enough of it so that prices will have stabilized on the high side.  Honestly, that will take many years – probably 25 to 50, but it will happen and you may well be alive to witness it.

Now for the short term we really can drill our way out of this mess we are in, and T. Boone Pickens knows it.  It is just a bad idea, and thats why he has come up with his bridge plan.  You see, Pickens is not only a billionare, but a bit of a visionary.  You can’t do what he has done without peering towards the future, and he is the first oilman to say that we need a different direction in transportation fuels.  The idea that we pay people that hate us billions of dollars to buy more gold plated yachts – you think I’m kidding, google it – is truly ludicrous.  We have quite a bit of natural gas in this country which is untapped, and although it would be a stretch to fuel our cars with it, we can take enough of them off of gasoline to make a difference in the short term.  America’s brightest and best minds are working on wind and solar and that is where the world needs them.  That is the future…well, that and some alien technology that we find buried beneath the gas surface of Saturn which was left by a benevolant society to get us out of a bind in our time of need.

No, seriously about the wind and solar..that is the future of energy.  Our country sends too much money overseas for energy, and we borrow that money back to pay our bills.  That is insane.  Other countrys like Saudi Arabia, Dubai and China literally own us!  They OWN US!  We have to change that, and like it or not we will.

America has been a slave to transportation its whole existance.  Whether it is human legs, horses, oxen, or planes trains and automobiles, we gotta move around.  The country is big and we don’t live in walking distance to our schools, churches and jobs.  We got that way because transportation became easier.  Henry Ford built affordable cars.  We have a semblance of a mass transit system in our major cities.  We just don’t have to live where we work.  Now the time has come to change that, but do you think Billy and Suzy Izod are going to move out of the suburbs to downtown where they work?  No.  Is Farmer Joe going to sell most of his farmland and only work on his home place?  Uh-uh.  But the good news is coming.

Besides the fact that solar and wind are getting much better much quicker, there are oil and gas technologies that are going to help us, and soon.  Scientists at universities all over the world have developed bacteria that can be dumped down a hole and eat the thick oil, poop thinner oil that flows better and can be more easily pumped.  Huh?  Yes.  They have developed bacteria that eat oil and poop natural gas.  Thats right.  That lets us get to most of the oil and gas we have left behind because it was to hard to get out of the ground.  That helps us in the long term, but by itself doesn’t solve the problem, but it does stretch out the end of the oil and gas universe by several hundred years.

The upshot of this whole editorial is this:  We will be ok, we will continue to produce oil and gas, you can still drive your car (although you won’t be putting gasoline in it much longer), and when we start using wind and solar on a grand scale in the USA we can begin to pay back the massive debt we have amassed to the rest of the world and America will once again be the most efficient and looked up to country in the world.

The future of the oilfield is pretty bright.