Well, yes

Abramov says: “Market forces will ultimately regulate the industry in a very brutal manner, forcing massive ‘shut-ins’ [well closures] across the country before the market imbalance can improve.”

That’s why we use markets, right?

In slightly more detail. Anyone think of any answer to the oil glut that doesn’t involve shutting in wells? Starting with those with the highest production costs? At which point markets unadorned are delivering our desired solution, aren’t they?

6 thoughts on “Well, yes”

  1. The oil industry has been good to me, but it was a roller coaster – boom or bust (market forces) – career option.

  2. Tim – I’m not a petroleum engineer so twist of salt etc., but I think capping or plugging the wells is a pretty drastic and relatively expensive measure they’ll only take at last resort. Could screw up future production as it’s less like screwing the lid on a bottle of lemonade, more like pouring concrete down the business end of a surging firehose – no guarantee you’ll be able to get that hose working properly again. Dunno if there’s a Plan B – most of the pressure in the well is endogenous, they can stop injecting additional pressure and reduce the rate of production but stopping it completely is a different order of magnitude type problem.

    Anyone know if I’ve got that wrong?

    Basically if it gets to that point, the North Sea is probably doomed. It might be there already – I know a lot of boys in Aberdeen and the general sentiment in the industry was pessimistic long before the current meltdown. Operating costs are something like $17 per barrel, which is a great achievement in such a difficult environment, but not sustainable at current prices.

  3. “Anyone think of any answer to the oil glut that doesn’t involve shutting in wells?”

    End lockdown quickly. Current problem is reduced demand.

  4. I know more about coal than oil, but in resource extraction you can’t just shut it down and turn your back on it if you ever want to re-use it. You need to run skeleton maintainance to keep it re-openable.

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