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Actually, they only halted the issuing of new permits. Oil companies have years of existing permits stacked up. Additionally, federal land makes up for about 10

by jjeaff 5y ago

Actually, they only halted the issuing of new permits. Oil companies have years of existing permits stacked up. Additionally, federal land makes up for about 10% of total US production. So it has about zero effect right now and will have minimal effect in the future.

pclmulqdq 5y ago
From the outside, you can see stats like "wells produce an average of 1000 barrels a day and last 20 years" and it looks like this doesn't have a big effect. However, most oil wells have output that decreases exponentially over the life of the well. After about 2 years of life, an average well's production decreases by 80-90%. As a result, new wells account for an outsized fraction of production, and considering all of the costs involved (including high constant costs per well regardless of pumping output), new wells are the cheapest source of oil. Without new wells, the average price to produce a barrel of oil goes up substantially. The US oil industry is starting the new wells they have in their backlog, but markets are ridiculously forward-looking and you should note that we are talking about the price of futures, not spot price today. Markets are anticipating having a much harder time getting further oil wells, and they are anticipating that the largest supply of currently unexploited oil is on public land. Put another way, current production doesn't involve much federal land, but future production expansion will largely have to happen on federal (and state) land. The number of wells on federal land has been declining over its history: we are at 38,000 leases in 2020 compared to 55,000 in 2008 (per the BLM), and data presented to congress suggests that in the past, 25% of oil production was on federal land. Today, the number is 8%. That supports the theory that new oil wells will largely have to be started on federal land rather than private land. This is a particular policy where extrapolation from current data undervalues the effect of the policy.

by jjeaff 5y ago

pclmulqdq 5y ago

From the outside, you can see stats like "wells produce an average of 1000 barrels a day and last 20 years" and it looks like this doesn't have a big effect. However, most oil wells have output that decreases exponentially over the life of the well. After about 2 years of life, an average well's production decreases by 80-90%. As a result, new wells account for an outsized fraction of production, and considering all of the costs involved (including high constant costs per well regardless of pumping output), new wells are the cheapest source of oil. Without new wells, the average price to produce a barrel of oil goes up substantially. The US oil industry is starting the new wells they have in their backlog, but markets are ridiculously forward-looking and you should note that we are talking about the price of futures, not spot price today. Markets are anticipating having a much harder time getting further oil wells, and they are anticipating that the largest supply of currently unexploited oil is on public land. Put another way, current production doesn't involve much federal land, but future production expansion will largely have to happen on federal (and state) land. The number of wells on federal land has been declining over its history: we are at 38,000 leases in 2020 compared to 55,000 in 2008 (per the BLM), and data presented to congress suggests that in the past, 25% of oil production was on federal land. Today, the number is 8%. That supports the theory that new oil wells will largely have to be started on federal land rather than private land. This is a particular policy where extrapolation from current data undervalues the effect of the policy.