Comments on: The option value of not drilling for oil A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: charliethompto Mon, 25 Apr 2011 15:12:10 +0000 I see your point about looking at future value versus present value. I also understand that most of these models don’t work.

For instance, what is the value to our nation if we reduce our dependence on foreign oil by “x” percent? What is the cost to our country of allowing our costs for energy to be higher than they otherwise might be during a time in which China, India, Brazil and others are rising superpowers?

Does it not appear that this future value tool is simply a way to justify doing nothing at all for ulterior motives?

By: Elektrobahn Mon, 25 Apr 2011 13:17:56 +0000 The absurdity of this article beggars belief.

Error No. 1 – Oil reserves aren’t finite, not at all. Proven reserves are limited only in the methods utilized in determining their size. In other words, more imaginative means of discovering and assessing reserves usually reveals larger-than-expected reserves, and usually in places where, again, they weren’t expected.

Error No. 2 – Following the reasoning that energy resources should be left in the ground, or under water as the case may be, then ALL oil drilling should be stopped, NOW. Hey, it’ll be worth more in the future, right? Meanwhile, let’s start a fire using wood and striking stones together. That’ll support an industrial economy, just like all those silly windmills.

By: Yourkidding8 Sun, 24 Apr 2011 22:53:48 +0000 Replacing the blow-out preventer on the maintenance schedule, would have prevented the Gulf spill. It had nothing to do with “manipulation” of anything. Do you walk barefoot, no clothes and use absolutely NOTHING processed with some petroleum product? No you don’t. So, your opinion, along with all the other idiotic one’s, are mute. As usual.

By: savannah05 Sun, 24 Apr 2011 17:19:04 +0000 Nonsense. What a limited opinion, on a complicated subject. I find it irresponsible to disregard 100 years of data just to make a cse for not drilling. Prices to produce will go up, regardless of technology gains, the regulators will demand it. Alternatives? lol, the magic silver bullet that we all think exsists. Depending on business to innovate our way our of this problem and then using government to punish those who do, the irony of democratic capitalism. I think the US should be worried much more about the pace of education and our competitivness with developing states then how and when we should use resources that are easily and cheaply attainable, with public approval. As long as this government and green lobby keeps us captivated with something as meaningless as off shore drilling, how can we complain about the failure of a sucessfull democratic system.

By: libertadormg Sun, 24 Apr 2011 16:05:15 +0000 Rushing into leasing high grade acreage without understanding the option value of oil is sheer folly. Whether the landowner is the US Government with deep water acreage or a private landowner in the Eagle Ford, knowing and understanding what is below the ground can earn you fantastic riches. I have witnessed with utter dismay at how landowners have unwisely squandered their once in a lifetime great fortune here in the prolific Eagle Ford by rushing to sign any oil and gas lease presented to them, even really, really bad leases with terrible terms.
Technology is improving at a very rapid pace. Better recovery factors and higher prices will ultimately pay patient landowners rich dividends. Those who wait will be richly rewarded.

By: kmandu37 Sat, 23 Apr 2011 16:46:54 +0000 Charlesr, ipla: the gulf of Mexico is not the only deep water drilling field in the world. All of the major private oil firms are multinational. Innovation will occur whether it is in our backyard or somewhere else.

I say let’s allow Petrobras to pioneer deep water drilling technology and the setbacks (read: high cost and accidents) that come with it off the coast of Brazil.

By: y2kurtus Sat, 23 Apr 2011 01:20:30 +0000 Less drilling in the short term would have both pros and cons.

On the pro side it would preserve a finite resource further into the future.

On the con side it would increase both imports and prices and decrease goverment revs (the goverment gets royalties and corporate taxes from drilling.)

All and all I’ll say drill baby drill.

By: ipla Fri, 22 Apr 2011 00:20:09 +0000 Felix, you are missing a key point here: if we stop most oil drilling in anticipation of future rapid progress in drilling technology, this progress won’t happen. The technology progresses only when we drill. It won’t just happen in a university.
You can argue that drilling will still likely to happen abroad and thus technology will progress regardless of our decision, but then we will have to import, not export these technologies, which is hardly inconsequential.

By: FosterBoondog Thu, 21 Apr 2011 18:27:43 +0000 The mistake in thinking of this as an option value problem is that it doesn’t ask “whose option?” Theoretically it should be the US citizenry. But of course the oil companies on whom we depend for extractive technology are in a different position. None of them have the option to delay extraction – or rather, if one of them decides to delay, another will extract now in its place and receive the profits. Its an agency problem… And the oil companies have effectively bought and paid for a compliant congress and administration – and the populace goes along because most of us are way too dense to understand anything beyond “OMG! Gas prices have gone up!”

By: FixedCarbon Thu, 21 Apr 2011 15:24:28 +0000 Apropos of Hotelling, Journal of Political Economy in 1931,

“1. The Peculiar Problems of Mineral Wealth. Contemplation of the world’s disappearing supplies of minerals, forests, and other exhaustible assets has led to demands for regulation of their exploitation. The feeling that these products are now too cheap for the good of future generations, ….

cheapness they are being produced and consumed wastefully”

(you can read it in Bulletin of Mathematical Biology Vol. 53, No. 1/2, pp. 281-312, 1991)