10/13/2004

Oil Technology

Is the new 3D technology for finding oil helping or hurting the market of oil? According to the article, Can Technology Find Oil Fast Enough, it seems to be helping the short-term oil market.

The new technology allows for easier finding of oil. It no longer takes days or weeks to guess about where the oil company may find oil. It is all right there projected on a big IMAX screen. What does this do for the market? It is allowing quicker and more accurate setup time per well. Before, guessing was the best means of where oil was. If that guess isn't correct, that is $40 million wasted on a well that has no purpose.

In the short-run it is good to find the oil and be able to extract it. What is wrong with this. Some people think that the oil supply will run out sooner this way. But, changing the way oil is found does not increase or decrease the amount demanded.

I think it is a great way to save costs, and lower the price of oil.

9 comments:

John West said...

Technology is definately a great things that especially affords the oil industry opportunities in which to lower it operating costs, in particular R & D. This 3D technology will help bolster up diminishing oil reserves in the short-run, but what are we as Americans going to do when the oil runs out? Do we all have the mindset that it is okay because it probably won't happen in our lifetime?

Bryce Larkin said...

I don't think oil will run out sooner if we can find it faster. The demand for oil will always be there and a decrease in price will change the demand slightly. Oil is inelastic for the most part, so people will buy the amount they need at a any price.

Anonymous said...

What is your view on the peak oil issue?

Ski-Doo said...

Even if we ever did get close to running out of oil to run our economies; we would find other sources of energy. Humans have incredible intuitions about themselve when placed with oppositions. Look at all of the inventions that we have had throughout the worlds history. When the need is extreme people always find a way to fix or satisfy those needs.

I don't think we have found alternite ways to power our cars because there is not an extreme need. But if there ever became one then we would figure out how to fix our problem, of that I have no doubt.

John West said...

Ski-doo your logic of not worrying about oil supplies is very interesting. It reminds me of how at the turn of the 20th century, the big train companies thought they didn't have to worry about coming up with better ways to transport people. The point is, that as a society, we need to always be looking ahead so that we can circumvent such occurances that would have drastic
consequences.

Maudi said...

3D oil finding tools are a great way to cut down the risk of drilling and getting a dry hole.3D sysmic is quite a bit more but, it allows the investor to be a little bit more sure of their investment. This technique has been around for a while in the oil industry, however it has always been to expensive to utilize. The costs are now coming down to where this tool can be worth the money.

Dr. Tufte said...

You folks are missing the point a little bit. Any technology that reduces the marginal cost of finding the oil will probably reduce its price and increase the quantity sold. So this will have an effect on the rate of exhaustion of this resource.

Alternatively, this technology can also be used to find oil more cheaply that is currently too expensive to extract. This would tend to increase the amount of reserves we have.

Jabberwockysr said...

The simple historical fact to point out would then be that alcohol will run an internal combustion engine just fine. Much of Brazil's domestic car market (used to be over 50%, I believe it has gone down to 10% or so now though) runs on alcohol derived from sugarcane. A quick google will give you directions as to how to modify your car to run on any desired gas/alcohol mix and how to make the still to manufacture the (undrinkable) alcohol. In the early days of cars, there was a choice between alcohol or gasoline to power your car and they would run on either. (Price wars ended that, with Prohibition enforcing it)

Dr. Tufte said...

The problem is that ethanol is not price competitive with gasoline derived from crude oil.

It is often incorrectly thought that it is competitive in the U.S. because ethanol is added to gas in some locations. This is not true. Ethanol production is subsidized much more heavily than gas production in this country. This creates a supply that is expensive that must be used. This role is fulfilled by requiring its use in certain blends and backing that up with the criminal justice system.

Brazil is a somewhat different situation because they have few oil reserves of their own (where oil could be produced more cheaply than bought), few pipelines (which would allow it to be shipped in cheaply), and insufficient refineries (making the final product more expensive).

The unifying theme in both of these examples is that ethanol is used either because it is made artificially cheap, or it is relatively cheap do to insufficient investment in infrastructre.