7/21/2019 Oil Price Bubble

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 The industry was hamstrung in its ability to respond. Contraction had taken its

toll. There were not enough petroleum engineers, not enough geologists, not

enough drilling rigs, not enough pipe, not enough supply ships, not enough of

everything. And so the cost of everything was bid up. Shortages of people and

delays in the delivery of equipment meant that new projects took longer than

planned, adding to the budget overruns.

 

n top of that, the cost of the inputs!such as the steel that went into platforms,

and nickel and copper!was also rising dramatically as China"s appetite for

commodities continued to draw in supplies from all over the world. This was the

era of the great bull market for commodities.

 

 The economic impact of all these shortages was stunning. Total costs for doing

business ended up more than doubling in less than half a decade. #n other words,

the budget for developing an oil $eld in %&&' would have been twice what the

budget for the same $eld would have been in %&&(. These rising costs also,

inevitably, contributed to the rising price of oil.