Tuesday, August 3, 2010

The Real Cost Of Oil

It is estimated that a total of 5 million barrels of crude oil have leaked from BP's Deepwater Horizon site, making it the worst oil spill in history.  And as of last night, the company's market capitalization was down a total of $62.5 billion when compared to before the disaster.  The loss was even bigger before the rebound, at $106 billion, see chart below.

Price of BP Shares

So what's the cost of a barrel of oil? For BP, it's definitely a case of crying over spilled crude: doing the division it comes to $12,500 per barrel - and it was even more before the bounce, at $21,250/bbl.

If we go a bit further and amortize the loss over BP's entire crude oil plus equivalents production for a whole year, it comes to $43/bbl.  And if we go all the way and amortize the market cap loss  over their entire proven reserves, it comes to $3.40/bbl. (Data from BP's 2009 Annual Report.)

Choose the number that best reflects "reality" in your view - it's only money, after all.  However, it does put a number on one of those "external" costs for oil.

Now... what's the cost for the Iraq and Afghanistan wars?... hmmm.

12 comments:

OkieLawyer said...

The Biggest Lie About U.S. Companies

According to the Federal Reserve, nonfinancial firms borrowed another $289 billion in the first quarter, taking their total domestic debts to $7.2 trillion, the highest level ever. That's up by $1.1 trillion since the first quarter of 2007; it's twice the level seen in the late 1990s.

The debt repayments made during the financial crisis were brief and minimal: tiny amounts, totaling about $100 billion, in the second and fourth quarters of 2009.

Remember that these are the debts for the nonfinancials — the part of the economy that's supposed to be in better shape. The banks? Everybody knows half of them are the walking dead.

Central bank and Commerce Department data reveal that gross domestic debts of nonfinancial corporations now amount to 50% of GDP. That's a postwar record. In 1945, it was just 20%. Even at the credit-bubble peaks in the late 1980s and 2005-06, it was only around 45%.

Kinuachdrach said...

"It is estimated that a total of 5 million barrels of crude oil have leaked from BP's Deepwater Horizon site, making it the worst oil spill in history."

Very disappointing! That is an astonishingly ill-informed remark. Downright pig-ignorant, to tell it straight.

The "worst oil spill in history"? Let me prompt your far-left brain with two words -- Saddam Hussein.

Ok, Ok. Maybe all you think about is how wonderful Saddam was and how evil the Americans were for stopping him feeding peons into the shredders.

All right. Let me add another word for the underserved liberal brain. Kuwait.

When Kuwait was liberated, Saddam Hussein had his retreating forces blow up every oil well in the country. More than 700 oil wells on fire. Darkness filled the skies. The oil spilled was certainly in the Billions of Barrels - nobody can say for sure how much.

Let's say 2,000 Million Barrels spilled by left-wing hero Saddam Hussein versus 5 Million Barrels spilled by rank incompetent Tony Hayward.

Your "worst spill in history" was only about 2% of the real worst spill in history. Liberalism rots the brain. It really does!

Hellasious said...

1. A deliberate sabotage is not an accidental "oil spill".
2. Kuwait's entire oil production comes to ~2 million bbl/day. Most fires were put out within weeks of Saddam's retreat.
3. I'll say it again: environmental disaster is not a blue, red or pink issue. It's a survival issue.

H.

Kinuachdrach said...

Hellacious -- we all make silly remarks on occasion. Those whose brains have not been rotted by liberalism will admit mistakes, learn from them, and move on.

Dismissing Saddam Hussein's oil spill as being something different because it was a deliberate Crime Against The Environment & Humanity makes no sense. If we are concerned about the environment, it matters not if the spill was deliberate or accidental -- it was still a spill.

Your remarks about the Kuwait disaster are even more ill-informed.

Yes, Kuwait was constraining production to about 2 Million Bbl/day -- but when the Baath Socialist Party blows the wellheads off, production is no longer constrained.

An airy saying that 700 (Seven Hundred!) blowouts were taken care of in a few weeks is once again pig-ignorant. You have seen how long it took BP to stop one blowout. The original estimate was that it was going to take 10 years to cap all the Kuwait blowouts -- it ended up being done in 9 months, because the Kuwaitis spent their national wealth assembling teams from around the world to stop the spill as fast as possible.

The fact is that the BP oil spill (bad as it was) was trivial compared to Saddam Hussein's spill in Kuwait. Leftie environmental extremists have lost a lot of credibilty with the rest of us because of their unwillingness to acknowledge facts.

OkieLawyer said...

@Kinuachdrach:

re: act of sabotage vs. negligence

Maybe you don't make a distinction, but the law does. The penalties for intentional criminal / tortious acts are analyzed differently than negligent / accidental ones.

Wait, are you saying that we should ignore the damage done by BP's (perhaps wanton) acts?

That perhaps we should just lay off BP and let them not pay?

That we should ignore damage to the environment by whatever (man-made) source?

I don't understand. Just what is your point?

Your "worst spill in history" was only about 2% of the real worst spill in history.

Um, well, the environmental damage done by spilling oil in the ocean's ecosystem is far more damaging than spilling onto a desert in terms of food supply. Not to mention the destruction of habitat for innumerable people who live on the Gulf Coast. These alone -- I would think -- would be enough to qualify it as "the worst oil spill in history" regardless of whether the amount of oil was the most wasted.

Kinuachdrach said...

Okielawyer -- So your point is that an oil spill 50 times the size of BP's spill can be ignored because only a bunch of ragheads were inconvenienced? Just a little bit racist there, Okielawyer, aren't you?

If you had ever been to Kuwait, you would have realized that some of the oil fields that Saddam Hussein's Baath Socialist Party blew up were beside some of the very limited fertile land in the country. But, hey, they're just a bunch of uppity rich Arabs, right?

Let me spell it out for you, Okielawyer, since your mind seems to have been fairly corroded by liberalism too.

I took exception to Hellasious' ridiculously erroneous claim that BP's Macondo oil spill was the "worst in history". But if lefties want to go around believing untruths, have at it! It won't be the only lie you people believe.

As a side comment, my objection to Hellasious erroneous comment should not be seen as minimizing BP's culpability in any way.

BP caused that spill -- and the deaths of 11 human beings -- by recklessly & repeatedly cutting corners to shave costs. BP has been doing it for years, and getting good write-ups from financial journalists because of their resulting higher margins. Well, they finally reaped the consequences.

I would like to see BP's former CEO Tony Hayward charged with 11 counts of manslaughter. And if BP does not survive, that will be even better. It will be a long time before anyone else in any company shaves drilling costs to the point of creating an unsafe situation.

That said -- even left-wingers should not be giving Saddam Hussein and his Baath Socialist Party a pass on their incredible act of wanton environmental destruction. I should not have to explain that to you.

OkieLawyer said...

@Kinuachdrach:

First, I never referred to Kuwaitis as "ragheads." And I am not a racist.

Second, in all of the films I have seen, I have never seen oil fields in or near "fertile land" -- particularly near farmland. Perhaps you have been there, but that is not a part of the world that I have visited; so you would be right in that I have no personal first hand knowledge Kuwait, or Iraq's oil field locations. Even so, that doesn't change the fundamental equation: no matter how much oil was spilled in Kuwait, it is still not a major producer of agricultural products.

In fact, I decided to take the time to look up Kuwait's facts. Other than fish, no other agricultural commodity is listed.

Let me remind you that you brought up how Saddam Hussein did more damage. You, by your comparison, were by inference minimizing the damage done in the Gulf of Mexico.

You said:

Let's say 2,000 Million Barrels spilled by left-wing hero Saddam Hussein versus 5 Million Barrels spilled by rank incompetent Tony Hayward.

The only problem is: in my research to verify your "facts" only the conservative National Review article put it in the 50 million barrels, not billions.

Everyone else, pretty much, put it in the single million barrels.

Of course, I had to spend too much time researching this info to debunk this false info you posted. Why do you conservatives do this so much? Why can't you just stick to facts?

That is one of the many reasons that I don't trust or believe anything you conservatives say anymore. It is an issue of what we lawyers call "credibility." You conservatives don't have any with me anymore.

OkieLawyer said...

@Kinuachdrach:

First, I never referred to Kuwaitis as "ragheads." And I am not a racist.

Second, in all of the films I have seen, I have never seen oil fields in or near "fertile land" -- particularly near farmland. Perhaps you have been there, but that is not a part of the world that I have visited; so you would be right in that I have no personal first hand knowledge of Kuwait's, or Iraq's oil field locations. Even so, that doesn't change the fundamental equation: no matter how much oil was spilled in Kuwait, it is still not a major producer of agricultural products.

In fact, I decided to take the time to look up Kuwait's facts. Other than fish, no other agricultural commodity is listed.

Let me remind you that you brought up how Saddam Hussein did more damage. You, by your comparison, were by inference minimizing the damage done in the Gulf of Mexico.

You said:

Let's say 2,000 Million Barrels spilled by left-wing hero Saddam Hussein versus 5 Million Barrels spilled by rank incompetent Tony Hayward.

The only problem is: in my research to verify your "facts" only the conservative National Review article put it in the 50 million barrels, not billions.

Everyone else, pretty much, put it in the single million barrels.

Of course, I had to spend too much time researching this info to debunk this false info you posted. Why do you conservatives do this so much? Why can't you just stick to facts?

That is one of the many reasons that I don't trust or believe anything you conservatives say anymore. It is an issue of what we lawyers call "credibility." You conservatives don't have any with me anymore.

OkieLawyer said...

@Kinuachdrach:

First, I never referred to Kuwaitis as "ragheads." And I am not a racist.

Second, in all of the films I have seen, I have never seen oil fields in or near "fertile land" -- particularly near farmland. Perhaps you have been there, but that is not a part of the world that I have visited; so you would be right in that I have no personal first hand knowledge of Kuwait's, or Iraq's oil field locations. Even so, that doesn't change the fundamental equation: no matter how much oil was spilled in Kuwait, it is still not a major producer of agricultural products.

In fact, I decided to take the time to look up Kuwait's facts. Other than fish, no other agricultural commodity is listed.

Let me remind you that you brought up how Saddam Hussein did more damage. You, by your comparison, were by inference minimizing the damage done in the Gulf of Mexico.

You said:

Let's say 2,000 Million Barrels spilled by left-wing hero Saddam Hussein versus 5 Million Barrels spilled by rank incompetent Tony Hayward.

The only problem is: in my research to verify your "facts" only the conservative National Review article put it in the 50 million barrels, not billions.

Everyone else, pretty much, put it in the single million barrels.

Of course, I had to spend too much time researching this info to debunk this false info you posted. Why do you conservatives do this so much? Why can't you just stick to facts?

That is one of the many reasons that I don't trust or believe anything you conservatives say anymore. It is an issue of what we lawyers call "credibility." You conservatives don't have any with me anymore.

OkieLawyer said...

Funny, a triple post, even though last night I kept getting a message that my post was too long.

Ugh.

Kinuachdrach said...

Okielawyer -- You are presumably a lawyer. You should not need me to tell you not to believe everything you read on the Internet, including those "single million barrel" mis-estimates!

As it happens, the Kuwait Oil Company hired western experts after Saddam's Baath Socialist Party had despoiled their environment. They needed an estimate of the volume of oil lost to let them manage their oil reservoirs properly. For just one single field in Kuwait, the western experts estimated over 1 Billion Bbl spilled -- based on access to proprietary Kuwaiti data. For the country as a whole, with many fields blown up by the departing Baath Socialists, a guesstimate of 2 Billion Bbl is easily defensible.

But let's come at it from another direction, and make a lowball estimate from public information.

In the early 1970s, when BP was getting oil out of Kuwait at a rapid clip, Kuwaiti production was about 3.3 Million Bbl/D. Kuwait had drilled more wells and developed other fields since then, after they (appropriately) kicked BP out. By 1990, the total capacity of Kuwait's oil wells was probably much higher, although Kuwait continued to restrict production because of facility capapcity. Let's just use 3.3 Million Bbl/day as a lowball estimate for the blowout production rate.

Amazingly, the Kuwaitis were able to extinguish Saddam's Baath Socialists' blowouts in only about 9 months -- 270 days, with most of the blowouts stopped towards the end of the period as resources & experience grew. Let's make a lowball estimate that the average well blew out for 200 days.

3.3 Million Bbl/d for 200 days equals a lowball estimate for the Socialist oil spill of 660 Million Bbl.

The western experts' estimate was about 3 times that because the rate at which a well blows out can be much higher than its normal production rate. Lack of restriction by normal back-pressure.

Bottom line, Hellasious' claim about BP's Macondo spill being the "worst spill in history" remains pure bunk -- by 2 or 3 orders of magnitude.

MCSE said...

everything is for oil
thanks
MCSE