The gas wars come again

Silvanus

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Agema said:
I'd be interested to see what the economic rationale is for that when they could, y'know, leave it in the ground and drill it out later.
I imagine the reason is the same one that routinely caused price crashes and bankruptcies over the last century: speculation.

By which I mean the drilling is probably done many months in advance.
 

Agema

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Silvanus said:
Agema said:
I'd be interested to see what the economic rationale is for that when they could, y'know, leave it in the ground and drill it out later.
I imagine the reason is the same one that routinely caused price crashes and bankruptcies over the last century: speculation.

By which I mean the drilling is probably done many months in advance.
Well, oil has to be pumped out, and I don't see why it takes months to turn a pump off. I get that potentially if there's only a short pause, some processes can involve specific stopping or restarting costs that means it's cheaper to keep going than have a short enough pause.

I wonder the oil is sort of temporarily negative, but the producers have some sort of system which means they'll still end up making a profit in the long run (which may involve speculation), or that there's some other sort of weird contractual thing where they somehow get paid by someone anyway.
 

tstorm823

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Agema said:
Well, oil has to be pumped out, and I don't see why it takes months to turn a pump off. I get that potentially if there's only a short pause, some processes can involve specific stopping or restarting costs that means it's cheaper to keep going than have a short enough pause.

I wonder the oil is sort of temporarily negative, but the producers have some sort of system which means they'll still end up making a profit in the long run (which may involve speculation), or that there's some other sort of weird contractual thing where they somehow get paid by someone anyway.
It's because of futures contracts. Buyers were locked into contracts probably months ago, and sellers aren't inclined to let them back out just because there's no demand.
 

Silvanus

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Agema said:
Well, oil has to be pumped out, and I don't see why it takes months to turn a pump off. I get that potentially if there's only a short pause, some processes can involve specific stopping or restarting costs that means it's cheaper to keep going than have a short enough pause.

I wonder the oil is sort of temporarily negative, but the producers have some sort of system which means they'll still end up making a profit in the long run (which may involve speculation), or that there's some other sort of weird contractual thing where they somehow get paid by someone anyway.
Even if it's a relatively quick thing to turn them off, I imagine they usually produce several months' worth in advance anyway. So, if they cease production now, they've still got a glut of oil they produced a few months ago on the expectation that they could sell it now.

Either that or the future contracts thing.