8 ms·

One thing to point out: Oil is still _huge_ when it comes to investment and sheer amount of financing available. Anything involving large-scale finance will

by jofer 7y ago

One thing to point out: Oil is still _huge_ when it comes to investment and sheer amount of financing available. Anything involving large-scale finance will have oil money involved in it in some way. Frankly, even at the height of the tech boom, the tech industry has never had significant capital available compared to the oil industry. I've worked in both... Folks in tech think 100 million in capital is a lot. In oil, that doesn't even qualify as a project that needs sign-off by upper management. (The last project I managed had a ~$200 million per year budget. I was a low-level peon 5 years out of grad school in charge of it because it wasn't considered a large enough project budget-wise to give to someone experienced. There are a few caveats around this -- the discretionary budget was on the order of 10 million and the rest was fixed through long-term contracts, but still...) Significant investments in the energy industry are measured in tens of billions per project. Profits from each of those projects are in the trillions, but spread out over 20-100 years. As a result, a big chunk of the finance industry is directly or indirectly tied to oil. There aren't many funds that don't have money somehow invested in or sourced from the energy industry.

throwaway66920 7y ago
I was at an iron works a while back where I learned that an industrial grade blast furnace was, ballpark, $100 billion. This was built 100 years ago. That day I decided I just didn’t and wouldn’t ever understand capital markets.
- markbnj 7y ago
  > I learned that an industrial grade blast furnace was, ballpark, $100 billion. That seems like a very large number for the construction of any industrial installation. Just poking around the net the numbers I found were $220/ton of pig iron produced, and another source that claimed a $2.5b cost in 1980 and $5b today. If the $220/ton figure is accurate a $100b blast furnace would be producing 455m tons of pig iron a year. According to wikipedia a modern furnace can produce about 5-6m tons per year.
- dekhn 7y ago
  that doesn't make any sense. the capital to build, and operating expenses, aren't anywhere near $100B (direct costs). $100M makes more sense.
- deleted 7y ago
  [deleted]
- trothamel 7y ago
  The GDP of the US in 1929 was $105B nominal and $1,109B real. So this blast furnace would have been between 10% and 100% of total GDP. That doesn't seem right.
- Robotbeat 7y ago
  Off by a couple orders of magnitude. Capital cost of a blast furnace, rule of thumb, is ~$200 per ton of pig iron per year: https://www.quora.com/How-much-would-it-cost-to-set-up-a-blast-furnace-iron-producing-unit https://www.quora.com/How-much-would-it-cost-to-set-up-a-bla... The largest blast furnace in the world is about 5 million tons of iron per year (and was upgraded to that capacity in 2013): http://www.donga.com/en/List/article/all/20130610/406398/1/POSCO%C2%92s-Gwangyang-blast-furnace-emerges-as-world%C2%92s-largest http://www.donga.com/en/List/article/all/20130610/406398/1/P... ...so that means the biggest blast furnace in the world has a capital cost of approximately $1 billion. More than likely the cost (in today's dollars) of that blast furnace you're referring to is $100 million, not $100 billion. Side note: direct reduction furnaces furnaces are usually cheaper from a capital cost perspective and can use natural gas or even hydrogen for producing steel... We may use more of this tech in the future as we move away from coal for sustainability reasons.... The US now produces about 10% of its raw iron/steel using DRI and 90% by blast furnaces and the rate of DRI growth is fantastic (going from 2 million tons in 2017 to 3.4 million in 2018, pdf page 10): https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b943-4cd9ab621a91/World%2520Steel%2520in%2520Figures%25202019.pdf https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b94... A few years ago, virtually no steel was made via DRI in the US. The fracking boom has changed a lot.
- rolltiide 7y ago
  Why don't you learn how the world works so you can confidently write to the intern “pls fix” because that was easy to call bs on
nradov 7y ago
The average cost for an offshore oil drilling rig is now about $650MM. The ones that can go really deep are even more expensive.
- samoa42 7y ago
  MM=B?
  - advisedwang 7y ago
    In the financial world MM is used to mean million.
  - alasdair_ 7y ago
    M is 1000 in roman numerals. MM is one million.
    - aashishkoirala 7y ago
      I think MM is 2000 in Roman numerals, no?
      - munk-a 7y ago
        You are technically correct, financial dudes like roman numerals but somewhere in history someone (probably someone reeeeeally powerful) started using MM for million and thus started the trend. Aside, swiss watches tend to have a watch maker's four on them instead of the more correct IV... and apparently there are a bunch of other variations out there[1]. Though MM is still quite stupid. 1. https://en.wikipedia.org/wiki/Roman_numerals#Variant_forms https://en.wikipedia.org/wiki/Roman_numerals#Variant_forms
        thaumasiotes 7y ago
        I believe the thought behind MM is "a thousand thousand", using the roman numeral as if it were a positional digit. Not sure how someone got the idea to do that...
asdfman123 7y ago
The problem here isn't oil but simply the power of the global elite. I went into this article thinking "So what? The world runs on oil, and oil has a lot of money. Welcome to learning about the economy." But yeah, it is concerning that private interests that don't share our same niceties about democracy and human rights have power over us.
- euroPoor 7y ago
  You willingly put up with the ‘global elite’ though.
  - mortivore 7y ago
    Define "willingly".
  - hummusoiler 7y ago
    "willingly" is a bit of a stretch considering the difficulty of doing so, and gives off a different connontation.
    - euroPoor 7y ago
      Of course it’s difficult, but we all have the means to build social movements, companies or sue if we feel that there’s something terrible going on. But we all like our flights, our cars, our cheaper and cheaper phones, stable policy in the West and perceived security. It’s hard but you can go against it. Just always saying ‘it’s the elite’ and then sitting it out seems really easy to me. Everyone has a conception of injustice, it just depends on how badly you crave that justice.
      - hummusoiler 7y ago
        There is a tremendous amount of intertia that needs to be overcome when starting a competing company or a movement to replace any of those. A lot of the competing companies have a large vertical integration in their field, and can refuse your supply for any of it
GhettoMaestro 7y ago
Damn and here I am spending days preparing to justify my requests for a measly $2M to $5M for project spends. I should go be an oil boy.
- jofer 7y ago
  Don't wish for it too much... Getting approval for any decision is like pulling teeth. As a project manager in the oil industry you still aren't the final decision maker in most cases, and even when you are, there are decision review boards/etc. There's a _lot_ of "process" to everything in oil. It's there for a good reason, but it can get out of hand. I once spent three months getting approval to spend $20 to order some data from the US government. It was exactly the same process that you'd go through for a $10 million purchase. (Didn't help that we were re-buying our own data from 20 years ago because we'd lost it, but that's a different story.) I billed another wing of the company at $465/hr during the entire process... I billed around $50k to get approval to order a $20 DVD with a bunch of old scanned documents on it. Things can get very strange in the oil patch sometimes...
nostrademons 7y ago
I agree with your main point, but capital investments in tech are getting significantly larger, and most people in "big" tech don't think $100M is all that much. Google's spent billions on self-driving cars. Many acquisitions are now in the $3-10B range (eg. Doubleclick @ $3B, GitHub @ $7.5B, Motorola @ $12.5B). A new semiconductor fab is around $8-10B. It's still possible to start a new company with just a laptop and free time in fringe markets like cryptocurrency, VR/AR, or many SaaS markets, but many of the exciting areas in tech today - AI, robotics, self-driving cars, gaming - require very large capital investments.
- TuringNYC 7y ago
  Not only that, but quarter-to-quarter investors and activist hedge funds often bully companies (tech or otherwise) to issue dividends and/or conduct buybacks instead of investing for the long-run. Google and Amazon are rare cash-cows able to support earnings growth and continue to invest for the long term, and even they get pressure to spend differently.
chibg10 7y ago
This is misleading though because energy projects produce returns over a much longer timescale (i.e. decades) than the typical tech project (a year or two?). In addition, the typical big tech firm is running a lot more projects than the typical large oil company (which maybe operates a count of oil fields in the hundreds). So it's very much expected that the capital investment per project will be higher in oil. But the fact of the matter is that Google, Amazon, Apple, and Microsoft have double the market capitalization of the largest private oil companies. So yes, they're objectively better capitalized taken as a whole -- even if the typical tech project has less investment and consequently working on tech projects as a low- or mid- level employee feels smaller.

by jofer 7y ago

throwaway66920 7y ago

I was at an iron works a while back where I learned that an industrial grade blast furnace was, ballpark, $100 billion. This was built 100 years ago. That day I decided I just didn’t and wouldn’t ever understand capital markets.

markbnj 7y ago
> I learned that an industrial grade blast furnace was, ballpark, $100 billion. That seems like a very large number for the construction of any industrial installation. Just poking around the net the numbers I found were $220/ton of pig iron produced, and another source that claimed a $2.5b cost in 1980 and $5b today. If the $220/ton figure is accurate a $100b blast furnace would be producing 455m tons of pig iron a year. According to wikipedia a modern furnace can produce about 5-6m tons per year.
dekhn 7y ago
that doesn't make any sense. the capital to build, and operating expenses, aren't anywhere near $100B (direct costs). $100M makes more sense.
deleted 7y ago
[deleted]
trothamel 7y ago
The GDP of the US in 1929 was $105B nominal and $1,109B real. So this blast furnace would have been between 10% and 100% of total GDP. That doesn't seem right.
Robotbeat 7y ago
Off by a couple orders of magnitude. Capital cost of a blast furnace, rule of thumb, is ~$200 per ton of pig iron per year: https://www.quora.com/How-much-would-it-cost-to-set-up-a-blast-furnace-iron-producing-unit https://www.quora.com/How-much-would-it-cost-to-set-up-a-bla... The largest blast furnace in the world is about 5 million tons of iron per year (and was upgraded to that capacity in 2013): http://www.donga.com/en/List/article/all/20130610/406398/1/POSCO%C2%92s-Gwangyang-blast-furnace-emerges-as-world%C2%92s-largest http://www.donga.com/en/List/article/all/20130610/406398/1/P... ...so that means the biggest blast furnace in the world has a capital cost of approximately $1 billion. More than likely the cost (in today's dollars) of that blast furnace you're referring to is $100 million, not $100 billion. Side note: direct reduction furnaces furnaces are usually cheaper from a capital cost perspective and can use natural gas or even hydrogen for producing steel... We may use more of this tech in the future as we move away from coal for sustainability reasons.... The US now produces about 10% of its raw iron/steel using DRI and 90% by blast furnaces and the rate of DRI growth is fantastic (going from 2 million tons in 2017 to 3.4 million in 2018, pdf page 10): https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b943-4cd9ab621a91/World%2520Steel%2520in%2520Figures%25202019.pdf https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b94... A few years ago, virtually no steel was made via DRI in the US. The fracking boom has changed a lot.
rolltiide 7y ago
Why don't you learn how the world works so you can confidently write to the intern “pls fix” because that was easy to call bs on

nradov 7y ago

The average cost for an offshore oil drilling rig is now about $650MM. The ones that can go really deep are even more expensive.

samoa42 7y ago
MM=B?
- advisedwang 7y ago
  In the financial world MM is used to mean million.
- alasdair_ 7y ago
  M is 1000 in roman numerals. MM is one million.
  - aashishkoirala 7y ago
    I think MM is 2000 in Roman numerals, no?
    - munk-a 7y ago
      You are technically correct, financial dudes like roman numerals but somewhere in history someone (probably someone reeeeeally powerful) started using MM for million and thus started the trend. Aside, swiss watches tend to have a watch maker's four on them instead of the more correct IV... and apparently there are a bunch of other variations out there[1]. Though MM is still quite stupid. 1. https://en.wikipedia.org/wiki/Roman_numerals#Variant_forms https://en.wikipedia.org/wiki/Roman_numerals#Variant_forms
      - thaumasiotes 7y ago
        I believe the thought behind MM is "a thousand thousand", using the roman numeral as if it were a positional digit. Not sure how someone got the idea to do that...

asdfman123 7y ago

The problem here isn't oil but simply the power of the global elite. I went into this article thinking "So what? The world runs on oil, and oil has a lot of money. Welcome to learning about the economy." But yeah, it is concerning that private interests that don't share our same niceties about democracy and human rights have power over us.

euroPoor 7y ago
You willingly put up with the ‘global elite’ though.
- mortivore 7y ago
  Define "willingly".
- hummusoiler 7y ago
  "willingly" is a bit of a stretch considering the difficulty of doing so, and gives off a different connontation.
  - euroPoor 7y ago
    Of course it’s difficult, but we all have the means to build social movements, companies or sue if we feel that there’s something terrible going on. But we all like our flights, our cars, our cheaper and cheaper phones, stable policy in the West and perceived security. It’s hard but you can go against it. Just always saying ‘it’s the elite’ and then sitting it out seems really easy to me. Everyone has a conception of injustice, it just depends on how badly you crave that justice.
    - hummusoiler 7y ago
      There is a tremendous amount of intertia that needs to be overcome when starting a competing company or a movement to replace any of those. A lot of the competing companies have a large vertical integration in their field, and can refuse your supply for any of it

GhettoMaestro 7y ago

Damn and here I am spending days preparing to justify my requests for a measly $2M to $5M for project spends. I should go be an oil boy.

jofer 7y ago
Don't wish for it too much... Getting approval for any decision is like pulling teeth. As a project manager in the oil industry you still aren't the final decision maker in most cases, and even when you are, there are decision review boards/etc. There's a _lot_ of "process" to everything in oil. It's there for a good reason, but it can get out of hand. I once spent three months getting approval to spend $20 to order some data from the US government. It was exactly the same process that you'd go through for a $10 million purchase. (Didn't help that we were re-buying our own data from 20 years ago because we'd lost it, but that's a different story.) I billed another wing of the company at $465/hr during the entire process... I billed around $50k to get approval to order a $20 DVD with a bunch of old scanned documents on it. Things can get very strange in the oil patch sometimes...

nostrademons 7y ago

I agree with your main point, but capital investments in tech are getting significantly larger, and most people in "big" tech don't think $100M is all that much. Google's spent billions on self-driving cars. Many acquisitions are now in the $3-10B range (eg. Doubleclick @ $3B, GitHub @ $7.5B, Motorola @ $12.5B). A new semiconductor fab is around $8-10B. It's still possible to start a new company with just a laptop and free time in fringe markets like cryptocurrency, VR/AR, or many SaaS markets, but many of the exciting areas in tech today - AI, robotics, self-driving cars, gaming - require very large capital investments.

TuringNYC 7y ago
Not only that, but quarter-to-quarter investors and activist hedge funds often bully companies (tech or otherwise) to issue dividends and/or conduct buybacks instead of investing for the long-run. Google and Amazon are rare cash-cows able to support earnings growth and continue to invest for the long term, and even they get pressure to spend differently.

chibg10 7y ago

This is misleading though because energy projects produce returns over a much longer timescale (i.e. decades) than the typical tech project (a year or two?). In addition, the typical big tech firm is running a lot more projects than the typical large oil company (which maybe operates a count of oil fields in the hundreds). So it's very much expected that the capital investment per project will be higher in oil. But the fact of the matter is that Google, Amazon, Apple, and Microsoft have double the market capitalization of the largest private oil companies. So yes, they're objectively better capitalized taken as a whole -- even if the typical tech project has less investment and consequently working on tech projects as a low- or mid- level employee feels smaller.