Tuesday, April 17, 2012

Chart of the Day: New Records for Oil/Gas Split

A new record was set last week when the share of U.S. rigs drilling for natural gas fell to only 32%, which was the lowest percentage since Baker Hughes started keeping records of the oil/gas split in 1987 (see chart above).  The previous record low share of rigs drilling for natural gas was 32.5% in September 1987.  As natural gas prices keep falling to record lows at the same time that oil prices are rising, the industry has shifted drilling activities from gas to oil, bringing the share of rigs drilling for oil from below 20% as recently as May 2009 to a record high of 68% last week.

This shift from gas to oil drilling illustrates how the price system transmits valuable information about relative scarcity, and brings about an automatic reallocation of productive resources by suppliers in response to price changes.  The power of the market, the invisible hand, and the profit motive in action....

15 Comments:

At 4/17/2012 2:02 PM, Blogger Benjamin said...

And now, if we could only get the free-market to apply to that GOP moonshine, otherwise known as ethanol.

 
At 4/17/2012 4:42 PM, Blogger Larry G said...

hmmm.... nat gas production has skyrocketed with prices plummeting but the number of drilling rigs has declined?

okay. someone please explain.

 
At 4/17/2012 5:41 PM, Blogger rjs said...

larry, that's percentage of rigs, doesnt say squat about number (which has increased, maybe doubled..

i really dont know what that shows...oil was priced higher in 2008 than now ($140), & much lower in 2009 ($40)

it does put a lie to obama interfering with oil drilling though, doesnt it?

 
At 4/17/2012 6:37 PM, Blogger Che is dead said...

"it does put a lie to obama interfering with oil drilling though, doesnt it?" -- rjs

President Obama’s offshore drilling moratorium following the 2010 oil spill caused widespread job losses and a significant drop in energy production in the Gulf of Mexico. Two years later, a U.S. House committee wants to know why the administration misled the public about the drilling ban.

The House Natural Resources Committee yesterday issued its first subpoena to the Department of the Interior after Secretary Ken Salazar refused to turn over documents related to the moratorium. At issue is why Salazar’s department suggested a panel of engineering experts supported the drilling ban when in fact they did not. -- Hot Air

Video: Drilling permits on federal land declining under Obama

 
At 4/17/2012 6:39 PM, Blogger Che is dead said...

"it does put a lie to obama interfering with oil drilling though, doesnt it?" -- rjs

President Obama has stated that there has been an increase in oil and natural gas production during his administration. The fact that this increase in production is occurring on private lands, not public lands, merely serves to affirm that the “Obama Administration’s restrictive policies cannot hinder production” on state and privately owned land.

Last year, President Obama released a new draft offshore drilling five-year lease plan which “CLOSES the majority of the OCS to new energy production through 2017.”

The most striking of the observations from the National Resources Committee is the declining revenue anticipated in President Obama’s budget. “According to the President’s own FY 13 budget proposal, in 2011, the federal government collected $1 billion in OCS rents and bonuses from lease sales. In 2012—the last year of the current five year plan, the budget anticipates collecting over $2 billion in rents and bonuses. In the first year of President Obama’s five year plan, rents and bonuses fall by 58 percent to only $852 million. By the last year of President Obama’s five year plan, the government is only collecting $569 million—a 72 percent drop from 2012 anticipated returns.” -- Big Government

Proposed regulations by the U.S. Environmental Protection Agency (EPA) to reduce air emissions from hydraulic fracturing operations would drastically reduce shale gas drilling by 31 percent to 52 percent, or 12,700 to 21,400 wells, over the 2012 to 2015 time period, according to a study by the American Petroleum Institute (API).-- Rig Zone

 
At 4/17/2012 6:40 PM, Blogger Che is dead said...

"it does put a lie to obama interfering with oil drilling though, doesnt it?" -- rjs

Ken Salazar, the man Obama chose to be his Secretary of the Interior

A stimulus bill it is not, for it locks up an additional 2 million acres to the 107 million acres of federally owned wilderness areas. That total is more than the area of Montana and Wyoming combined.

This bill, which also provides $1 billion for a water project designed to save 500 salmon in California, takes about 8.8 trillion cubic feet of natural gas and 300 million barrels of oil out of production in that state, according to the Bureau of Land Management (BLM).

The energy resources walled off by this bill would nearly match the annual production levels of our two natural gas production states — Texas and Alaska. As Sen. Tom Coburn, R-Okla., points out: "We are not suffering from a lack of wilderness areas in the United States. According to the Census Bureau, we have 106 million acres of developed land and 107 million acres of (officially declared) wilderness land."

Earlier this year, Interior Secretary Ken Salazar canceled 77 Utah oil and gas leases that had gone through seven years of studies, negotiations and land-use planning. They were rejected because temporary drilling operations might be "visible" from several national parks more than a mile away. We are not making this up. -- IDB

 
At 4/18/2012 12:36 AM, Blogger Ken said...

nat gas production has skyrocketed with prices plummeting but the number of drilling rigs has declined?

okay. someone please explain.


Increases in productivity. Doing more with less.

 
At 4/18/2012 2:59 AM, Blogger Abir Mandal said...

Ken: Rigs are used for exploration and initial installation on pipes used to extract hydrocarbons. After the piped are installed, the rigs are removed and redeployed. Since gas prices are low, it makes more sense for oil companies to bring oil production online. So more rigs are being diverted to oil reservoirs, in the expectations of more profit from oil extraction. Free markets at work!

 
At 4/18/2012 4:26 AM, Blogger Larry G said...

re: " nat gas production has skyrocketed with prices plummeting but the number of drilling rigs has declined?"

actually.. the chart depicts SHARE so isn't it entirely possible that BOTH oil AND gas rigs have increased but that oil rigs have increased much more giving it a much larger share?

"share" is not a real meaningful measure and can be misleading, eh?

 
At 4/18/2012 6:24 AM, Blogger Rufus II said...

Last week's Baker-Hughes report had "rigs drilling for gas" down 24 to 623 (from nine hundred and something a while back.) This is the lowest level in many years.

 
At 4/18/2012 9:00 AM, Blogger tode98 said...

If rigs are used for shale oil, natural gas is a natural by-product. Hence gas production may not necessarily be affected significantly as a result of changes for rig (primary) usage?

 
At 4/18/2012 9:31 AM, Blogger Pulverized Concepts said...

http://nailheadtom.blogspot.com/2011/01/obama-administration-gives-boost-to.html

 
At 4/18/2012 12:31 PM, Blogger Abir Mandal said...

Yes Larry, so what? It still shows oil fields are being preferred for new rigging activities over gas. What Dr. Perry said still holds.

 
At 4/18/2012 1:29 PM, Blogger Paul said...

"it does put a lie to obama interfering with oil drilling though, doesnt it?" -- rjs

click here to view a map detailing the vast majority of the OCS Obama declared off-limits for new drilling.

 
At 4/20/2012 5:40 PM, Blogger james said...

Talk about a split that putting lightly.

 

Post a Comment

Links to this post:

Create a Link

<< Home