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The $10 barrels are for delivery now, not next year. If you can store the oil you can earn a lot of money now. But most people can't store much oil, compared t

by Arnt 7y ago

The $10 barrels are for delivery now, not next year. If you can store the oil you can earn a lot of money now. But most people can't store much oil, compared to the volumes that are being pumped out of the ground. And for many of the producers, slowing down production by more than a few per cent is also difficult — once you turn off the tap you don't really know whether the oil is going to start flowing again later. So the effect is a steep price fall.

alexis_fr 7y ago
I know no-one here seriously thinks about buying and storing a barrel in their cave, but it’s still worth saying: Oil is surprisingly very toxic, it contains a lot of uncontrolled compounds with sulfur for example, by definition (The goal of refineries is obviously to separate those compounds). https://www.bloomberg.com/news/articles/2015-11-03/that-time-i-tried-to-buy-some-crude-oil https://www.bloomberg.com/news/articles/2015-11-03/that-time...
crazygringo 7y ago
> once you turn off the tap you don't really know whether the oil is going to start flowing again later Wait, really? I'm Googling but can't seem to find anything at all about shutting down oil wells temporarily. What exactly is the difficulty? Why would "turning off the tap" be a risk -- the pressure oil might be under isn't going to go away, is it? (If it doesn't require pumping.) Is it a risk that materials in the drilled hole harden if not moving? I would have thought the difficulty might be how to effectively cap a well that is under pressure -- is it so difficult that closing a well risks damaging the equipment that it can't be safely opened back up? Really curious here if you have the answers! The fact that oil wells can't be slowed down is definitely one of the most surprising economic facts I've learned in a long time.
- Arnt 7y ago
  I got this verbally from my uncle, whose day job was to find ways to extract more oil from rocks. To begin with, the oil is there, stably, at rest. At some point people come along, estimate the layout of the rocks (many km³ and far underground) and drill holes to change the way the pressure works and make as much as possible of the oil flow to a particular location. The geology decides how much that is, modified by the paths of the holes involved, and also by how much water is pumped in, where. If you now close it quickly, the pressure's going to change somehow and you don't know precisely where and how. The end effect may be that when you reopen, something has changed down there such that instead of extracting 40% of the total oil you can only get 39%. Or such that you have to drill more holes in order to gain back your production velocity, the cost of which is far higher than producing at a loss for a month.
koheripbal 7y ago
And think is why the stock prices of companies that have a bunch of oil tankers has shot up.
agumonkey 7y ago
also oil storage is probably not covered by your house insurance :)
throwaway_pdp09 7y ago
> once you turn off the tap you don't really know whether the oil is going to start flowing again later You mean it can actually physically stop if the flow from the ground is blocked for a while? Can you expand if possible. Edit: I understand it comes out of the ground quite hot (I've heard of 200 C) and if it flows into cool pipes and stays still maybe it would 'congeal'.
- Arnt 7y ago
  No, it's a matter of the complicated and only partly known geology underground. See other answer. Another way of looking at it is: You've drilled holes to make the oil flow. There are kilometers of rock on top of the oil layer, pushing down, pushing the oil towards the holes you've drilled. You can close the end of the hole, but you can't make that weight go away. The system is going to find a new equilibrium. The new equilibrium is not one you've tried to optimise for maximum total oil production.
- mordymoop 7y ago
  It’s simply not true that you don’t know if the oil will flow again. It will. The subsurface pressure and fluid behavior is well understood. One of the only scenarios that might lead to wells failing to flow when reopened would in wells that were freshly tracked without flowing back the frack water. In this case the frack water will soak into and damage the clay-like minerals in the rock and damage the permeability of the rock.
- stoneman24 7y ago
  While there can be a great deal of pressure pushing the oil up the well, there is also resistance to that flow up a narrow pipe (perhaps 4 inch pipe). The balance of forces can be very close but the momentum can keep the flow going. In some fluids, there can be methyl hydrates (or wax) that can cause problems with maintaining flow. There can also be particles that are moving in the fluid (sand), slowing or stopping the flow can cause these particles to settle, preventing future fluid movements. There is a temperature and pressure gradient which can allow dissolved gas to bubble out the fluid as it ascends the well which can lead to added complexity. And we haven’t yet discussed oil recovery methods like gas/water injection or electrical sub surface pumps. Getting a well restarted after shutdown, may not be possible. I worked with some petroleum engineers, getting the best from your wells can be a very complex simulation problem followed by expensive engineering solution.

by Arnt 7y ago

alexis_fr 7y ago

I know no-one here seriously thinks about buying and storing a barrel in their cave, but it’s still worth saying: Oil is surprisingly very toxic, it contains a lot of uncontrolled compounds with sulfur for example, by definition (The goal of refineries is obviously to separate those compounds). https://www.bloomberg.com/news/articles/2015-11-03/that-time-i-tried-to-buy-some-crude-oil https://www.bloomberg.com/news/articles/2015-11-03/that-time...

crazygringo 7y ago

> once you turn off the tap you don't really know whether the oil is going to start flowing again later Wait, really? I'm Googling but can't seem to find anything at all about shutting down oil wells temporarily. What exactly is the difficulty? Why would "turning off the tap" be a risk -- the pressure oil might be under isn't going to go away, is it? (If it doesn't require pumping.) Is it a risk that materials in the drilled hole harden if not moving? I would have thought the difficulty might be how to effectively cap a well that is under pressure -- is it so difficult that closing a well risks damaging the equipment that it can't be safely opened back up? Really curious here if you have the answers! The fact that oil wells can't be slowed down is definitely one of the most surprising economic facts I've learned in a long time.

Arnt 7y ago
I got this verbally from my uncle, whose day job was to find ways to extract more oil from rocks. To begin with, the oil is there, stably, at rest. At some point people come along, estimate the layout of the rocks (many km³ and far underground) and drill holes to change the way the pressure works and make as much as possible of the oil flow to a particular location. The geology decides how much that is, modified by the paths of the holes involved, and also by how much water is pumped in, where. If you now close it quickly, the pressure's going to change somehow and you don't know precisely where and how. The end effect may be that when you reopen, something has changed down there such that instead of extracting 40% of the total oil you can only get 39%. Or such that you have to drill more holes in order to gain back your production velocity, the cost of which is far higher than producing at a loss for a month.

koheripbal 7y ago

And think is why the stock prices of companies that have a bunch of oil tankers has shot up.

agumonkey 7y ago

also oil storage is probably not covered by your house insurance :)

throwaway_pdp09 7y ago

> once you turn off the tap you don't really know whether the oil is going to start flowing again later You mean it can actually physically stop if the flow from the ground is blocked for a while? Can you expand if possible. Edit: I understand it comes out of the ground quite hot (I've heard of 200 C) and if it flows into cool pipes and stays still maybe it would 'congeal'.

Arnt 7y ago
No, it's a matter of the complicated and only partly known geology underground. See other answer. Another way of looking at it is: You've drilled holes to make the oil flow. There are kilometers of rock on top of the oil layer, pushing down, pushing the oil towards the holes you've drilled. You can close the end of the hole, but you can't make that weight go away. The system is going to find a new equilibrium. The new equilibrium is not one you've tried to optimise for maximum total oil production.
mordymoop 7y ago
It’s simply not true that you don’t know if the oil will flow again. It will. The subsurface pressure and fluid behavior is well understood. One of the only scenarios that might lead to wells failing to flow when reopened would in wells that were freshly tracked without flowing back the frack water. In this case the frack water will soak into and damage the clay-like minerals in the rock and damage the permeability of the rock.
stoneman24 7y ago
While there can be a great deal of pressure pushing the oil up the well, there is also resistance to that flow up a narrow pipe (perhaps 4 inch pipe). The balance of forces can be very close but the momentum can keep the flow going. In some fluids, there can be methyl hydrates (or wax) that can cause problems with maintaining flow. There can also be particles that are moving in the fluid (sand), slowing or stopping the flow can cause these particles to settle, preventing future fluid movements. There is a temperature and pressure gradient which can allow dissolved gas to bubble out the fluid as it ascends the well which can lead to added complexity. And we haven’t yet discussed oil recovery methods like gas/water injection or electrical sub surface pumps. Getting a well restarted after shutdown, may not be possible. I worked with some petroleum engineers, getting the best from your wells can be a very complex simulation problem followed by expensive engineering solution.