Oil production
THE ROLE OF THE INDEPENDENT OIL PRODUCER IN TODAY'S MARKET Should a poll be taken of the populace of our nation regarding the role of the independent oil producer in today's economy, the likelihood of negative feedback is highly probable. For, most Americans are disgruntled with the "high" price of gasoline and generally feel anyone remotely connected with the oil industry is quite wealth, to the point of being a "fat cat". In the few minutes I have today, please allow me to present an alternative view. Hopefully, you will agree with me that, not only is it is a much more accurate view but is also one in which you now can espouse. Granted, the price of gasoline has risen sharply in recent months to record levels. However, it has been less than f
At some point, those people need to stop and honestly ask themselves what the value of gasoline is to them and consider alternatives. The producer actually is paid an average daily monthly price by the refiner; however, in South Arkansas, that average price is approximately 25% less than the spot. The "lifting costs" of a stripper well in South Arkansas, the outlay to produce one barrel of crude oil into the stock tank, is approximately $20 per barrel. Thirty years ago, a loaf of bread, a pack of cigarettes and a gallon of gasoline each cost 33 cents. Although completely justified, those expenditures add nothing to the value of the crude produced, but are only ancillary expenses which must be absorbed. Further, generally speaking, most people think the producer is paid the spot price quoted on the television each day. And, although I will deal with the pricing issue later in the presentation today, it should be a sensitive consideration due to the expense side of the ledger. 50, yet, most people are extremely upset that a gallon of gasoline is now over $2. Historically, world oil prices have fluctuated substantially (see poster). For that reason, domestic oil production and exploration has been on the decline since the mid-1980's. The refiner can, consequently, protect its margin at the expense of the local producer. Even if the explorer is successful, maintenance costs are, in some cases, completely out of parity. For, the oil production related expenses have continued to escalate over the past several decades with no consideration for the available revenue.
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Acceptance Essays
