John Kemp has posted a nice article about SPR being ready to take in 30 million barrels of oil. I wonder how much demand will be lost forever and how much will become latent demand when the economy roars back.A little back of the envelope map may help with this. Always wondered were the expression "Back of the envelope" came from. It seems to be a term of frugality or quickly. I recalled my grandfather would use envelopes for paper all the time, bible verse, etc. I wonder if it was rooted in the depression.Anyways just typing out loud.Have a good Sunday.
I agree completely. I can't imagine this over-supply of oil ending any time soon (and "any time soon" being in my lifetime). I think it's been four years now since the Saudis and the powers-that-be started talking about "re-balancing" -- an euphemism for bringing down the amount of oil in storage. I've tracked that for four years; nothing had changed even before the coronavirus pandemic. US onshore production changed everything.A number of readers tell me I'm wrong, but I truly think Saudi Arabia is in a fight for its very survival. "Back-of-the-envelope": https://www.quora.com/Phrase-Origins-Why-is-it-called-a-back-of-the-envelope-calculation.
It is time for long term thinking in North Dakota. The resources are there the prices are not. Thankfully low prices lead to high prices, its just a matter of time.What the Govt should do.Create a partial tax Holiday make the bakken/three fork the field of choice CEO's make choices on tax levels all the time.Create Industry and storage incentivePartial tax holiday for new fields/ Tyler/ lower lodgepole, etc.Fertilizer Plant needed yesterday... Help with flaring and value added.Quit looking at the fund as a retirement account for North Dakota but rather as an Investment account for future growth... It will only grow the account further if done correctly.Time to start poll on when this will all blow over?Thanks again for this great blog.
I had thought of many of those same things including a "tax holiday," and was going to post it, but Bismarck and Fargo have gotten addicted to those Legacy Fund deposits (and there's a bit of anti-oil sentiment in Fargo to begin with) so a tax holiday is not going to happen. Bismarck might start to think about it if the Bakken completely implodes, but I don't think it will. Lay down all rigs today and there's still a lot of work to be done: DUCs, inactive wells, and maintaining tens of thousands of wells (work-overs, re-fracks, etc).