This isn't directly related to this post, but regarding industry level reinvestment rates and capex, do you have any way of adjusting your historical and current data for gains in efficiency? We've seen a trend over the past few years of needing significantly less capex per barrel recovered it seems. Exxon has said it historically only recovered about 10% of oil in the ground and is now close to it's goal of 20% recovery for newer wells. Also rig counts have went down drastically while total oil production is at record highs. It seems like some kind of adjustment needs to be made in order to account for these significant efficiency gains.
Efficiency gains are a forever trend. and within plays, e.g., shale, you see it and model it. But also true in other areas as well. These things can also go in the opposite direction as we saw over 2004-14 where there was significant inflation during a major boom period. It is consistent with broader profitability cycles...10-15 years in each direction (i.e., inflation v deflation).
Thank you Kit. I believe US producers will respond to price/return signals. Meaning if oil rallied to $90+ in a situation driven by booming demand (rather than say what could be viewed as a one-time geopolitical disruption), I think they would respond with higher supply in that scenario. I don't believe politicians from either party can brow beat companies to produce more.
“Build Baby Build”. I love it!
This isn't directly related to this post, but regarding industry level reinvestment rates and capex, do you have any way of adjusting your historical and current data for gains in efficiency? We've seen a trend over the past few years of needing significantly less capex per barrel recovered it seems. Exxon has said it historically only recovered about 10% of oil in the ground and is now close to it's goal of 20% recovery for newer wells. Also rig counts have went down drastically while total oil production is at record highs. It seems like some kind of adjustment needs to be made in order to account for these significant efficiency gains.
Efficiency gains are a forever trend. and within plays, e.g., shale, you see it and model it. But also true in other areas as well. These things can also go in the opposite direction as we saw over 2004-14 where there was significant inflation during a major boom period. It is consistent with broader profitability cycles...10-15 years in each direction (i.e., inflation v deflation).
Thank you Kit. I believe US producers will respond to price/return signals. Meaning if oil rallied to $90+ in a situation driven by booming demand (rather than say what could be viewed as a one-time geopolitical disruption), I think they would respond with higher supply in that scenario. I don't believe politicians from either party can brow beat companies to produce more.