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It's both :) Saudis and Russians have decided to increase their output of oil at the exact same time that most companies and businesses are choosing to reduce
by quaquaqua1 7y ago
It's both :)
Saudis and Russians have decided to increase their output of oil at the exact same time that most companies and businesses are choosing to reduce their oil consumption.
Additionally, there are not a lot of cheap ways to store oil long term, and it is difficult and costly to shut down production as well.
In Western Canada, pretty soon there will be negative oil prices, because the oil there is of a lower quality than others. Basically, they are paying for it to be trucked away so that it doesn't harm future production efforts.
- lozaning 7y agoI know nothing about how oil gets out of the ground. Why is it expensive to stop production at a well site? In my mind you just turn the pump off that's sucking the oil out of the hole.
- labcomputer 7y agoFor wells in Western Canada, in particular, the challenge is that the oil is so viscous (they're called "tar sands" for a reason) they have to heat (often with steam) the ground to pump it out. As you'd imagine, this requires a large amount of energy. So stopping production implies letting the ground cool, and restarting implies dumping a lot of (expensive) energy back in before oil will flow.
- aembleton 7y agoTo continue production, they'd need to put at least as much energy into the ground as it takes to restart it as it always going to be cooling. The energy has to come from somewhere.