well capping

WELL CAPPING
Yesterday was post 777, which normally would get me all excited about a lucky number. But, alas, that includes guest articles so it's not MY number of articles. But very soon, oh yes, very soon the planets will align and Lady Luck will look down upon me, give a little shrug, and grant her favors out of pity. This is like Christmas, it could be anything. Today was payday so I went to my banks at the start of lunch hour. Usually this wastes half my lunch hour but traffic cooperated and it only took me twenty minutes. Still, it will be a shorter article today so I figured it would be the well capping article. A loyal minion alerted me to this. He sounded concerned, but I can't share the excitement. I'm not saying he is wrong, just that I don't agree with it. Believe me, I would love to be wrong.
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I don't remember where this was exactly, I think the Gulf Of Mexico. Supposedly, the companies drill a well and then immediately cap it. The implication being that they are waiting for prices to go up and that we have a bizillion barrels of oil left and thus will never run out. I don't doubt that plenty of wells get capped without production. I just don't think it is an evil plot. I love conspiracy theories, but if it doesn't benefit someone it is easily discounted. I like to think that the Iraqi war was about the oil, but who benefits? Keeping oil off the market did raise prices, true, but with the violence destroying infrastructure it seems counterproductive. If the oil can never be produced, doesn't that hurt the companies long term? Unless they are really trapped in short term thinking. So I guess that could go either way. But destroying future supplies for short term profit is far more believable than denying immediate profits for long term gain. Very few companies can even conceive that a viable business is needed past the next quarterly profit figures. And if you are paying massive amounts of money to drill, don't you need cash flow to service the debt you have?
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There is always a certain failure rate with drilling. That is built into the profit equation. And even when you hit oil, you sometimes need to cap the well anyway. If you can't get over a certain daily production you can't recover the costs of your overhead ( labor, equipment, energy, etc. ). So, as the price of crude goes down, you need to cap more and more marginally producing wells. Your overhead costs don't fall with the price of crude. I think this is a simple explanation and doesn't need a conspiracy theory to explain. Calling this a conspiracy also falls into the wishful thinking category. There is no simple answer to our petroleum addiction. The withdrawals will come. Period. As I said, I hope I'm wrong about this. I would love to be wrong, and have a huge supply of oil waiting as we needed it. Alas, I'm not an optimist when it comes to that sort of thing. And perhaps I'm overlooking something. Please feel free to correct me if I'm wrong. In the meantime, I'll continue flapping my arms and screaming in a shrill voice that we are all going to die.
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Like economics? Check out http://ispeakofpeak.blogspot.com/
Thanks, Backwoods Blog for this http://backwoods-living.blogspot.com/2009/05/editorial-peak-oil-not-speculation.html which is interesting although not really related to the above article.
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