Marginal oil production costs are heading towards $100/barrel

[Javaman]

http://ftalphaville.ft.com/blog/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

Bernstein’s energy analysts have looked at the upstream costs for the 50 biggest listed oil producers and found that — surprise, surprise — “the era of cheap oil is over”:

Tracking data from the 50 largest listed oil and gas producing companies globally (ex FSU) indicates that cash, production and unit costs in 2011 grew at a rate significantly faster than the 10 year average. Last year production costs increased 26% y-o-y, while the unit cost of production increased by 21% y-o-y to US$35.88/bbl. This is significantly higher than the longer term cost growth rates, highlighting continued cost pressures faced by the E&P industry as the incremental barrel continues to become more expensive to produce. The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. Assuming another double digit increase this year, marginal costs for the 50 largest oil and gas producers could reach close to US$100/bbl.

While we see near term downside to oil prices on weaker demand growth, the longer term outlook for higher oil prices continues to be supported by the rising costs of production.

This is important because, as Bernstein analyst Neil Beveridge and colleagues note, the cost of producing marginal barrels of oil plays a big role in determining oil prices.

more at link...

[dkf]

1. I bet a lot of people don't understand the significance of this. They prefer to believe in bogeyman

Aka "evil speculators". It's more convenient that way.

[DJ13]

2. or

.......this is another round of speculator driven bullcrap to justify higher prices.

Its not like its an unheard of practice in the markets.

[earthside]

3. Use your eyes and ears.

All we hear about and see on TV and the internet is about fracking for tight oil production; and deep, deep water drilling.

It is not so complicated. The kind of 'new' oil that is being pumped is much more expensive to get.

The days of sticking a straw in the ground are long gone.

Speculators certainly play their little part in the price of oil and gasoline, as do greedy oil and natural gas corporations, but the era of cheap oil is over.

And we are way, way behind in creating a civilization that even remotely keeps our standard living like it is now.

[dkf]

5. Fracking is driving down costs too. When the relationship between drilling and prices is made

obvious the environment will be the loser.

Obama missed the boat getting solar and renewables online. He let natural gas into the loop and now we will become more dependent on another depleting resource. He really botched it.

[DJ13]

6. How many times do you willingly accept the lies by the financial industry

Before you rightfully question everything they tell you?

[dkf]

4. I rest my case.