So i watched the movie deepwater horizon, which i thought was great and I was left with a question. With many countries able to extract oil easily at low cost why is deepwater drilling done? More so with the low prices atm how is it even profitable? It seems like an unnecessary risk/cost when there is already an oversupply of oil on the market from safer land oil rigs.
"Supply" is a relative term, when you relate it to dollars only. 1. Many people want oil to be cheaper, why wouldn't people want petrol for 25c a litre 2. Why would oil anywhere else in the world matter to the owner/worker in a different country. the only oil that matter to them is the field they own or work. As long as they can sell oil for profit. 3. Risk is relative too isn't it, BP only lost few years profit, they are not going bankrupt. Roll a dice, win than twenty good years or lose and three or four average year. 4. Why is anything cheaper, because technology, from what I read (few years back) deep water oil can be drilled for $25 to $40 likely to be cheaper now. Much like silver or gold, there is plenty more in the ground, but it's not worth digging it out at a given price. Stawell gold mine in Vic just recently shut after digging out 32,000 ounces of gold, because it wasn't worth it at current spot, likely to be many hundreds of thousands of ounces gold still there, just not economical to dig it out, but if spot went up $xxx, likely to reopen
Because it can be drilled and sold at a profit. That is like saying, whatever job you or I do, someone else in some other location/country can do it cheaper, so why do it.
Yes i understand this. I guess what i should have been more clear about is this. knowing the environmental impact these deepwater drilling can cause to many countries how do they get government approval when there is no need to drill there. I remember back many years ago the argument was that we are running out of oil and that's why they need to drill in these very risky places, but we know now that was all BS.
I question if that is the all in cost (including inevitable fines they have to pay due to the high risk of errors) i think it would be closer to $60+ "ALL" in cost.
Regulations. Regulations in place at the time prevented drilling or mining at the Alaska Artic National Wildlife Reserve, Oil Sands in Alberta (mining), National Petroleum Reserve in Alaska and Shallow Offshore off The Gulf of Mexico. The drilling could have been done in much more shallow water, instead of the 6,000 feet the government forced BP to drill. And after the fact, apparently an example of a law that made the negative impact of the oil spill even worse is the Jone's Act. The consequence of the Jones' Act was to prevent the experts in the field of cleaning up oil, from helping and thus lessening the devastation. As Ipv6Ready said, however, the profit potential demonstrates the average consumer is more willing to have the oil with the odd bit of environmental damage here and there (and risk of a catastrophic failure like Deepwater Horizon) rather than no oil and no environmental damage. Given how pervasive oil is embodied in my life I certainly subscribe to that risk as well.
Though my point being is that there is heaps of oil anyway. So even if they didn't do deepwater drilling there will still be heaps of oil at low price from Saudi Arabia, Russia, Iraq, China, Iran etc.... Deepwater drilling doesn't make the price of oil that much cheaper, as the cost for such oil extractions is high. Government didn't force them to do anything, they made a stupid choice to take that risk.
Very few things are black and white... It also have a lot to do with the owners of the assets, if you look at BP many of the share holders are British pensioners and other managed funds. I don't own any shares in BP directly but maybe my or your super or managed funds do, these funds put pressure on our behalf for profits. Also consider gold mining, not 1 mine is good for the environment. But many claim it is environmentally friendly but what does environmentally friendly mean?
You might be right, and these companies have deep pockets few dollars off now below cost wouldn't matter, but better and cheaper technologies are continually driving cost down, plus very few businesses factor in fines. The first deep water drill likely have cost billions and billions of R&D before the first steel plank was made, and the first rig likely have cost multiple billions in tooling. 2nd one likely fraction of cost as many of the tools to build these rigs have already been made and much less R&D.
I agree with this. I guess this is the state of the world in all areas today. Share holders push for ever growing profits at any cost. Like they said in the movie " money, money, moooney.
On the contrary, most dilemma are black and white and able to be resolved, at least in theory anyway. I's usually politics that undermines most attempts at conflict resolution. All human activity has an impact on the environment, it is unavoidable. In fact there's not a square inch of this planet's surface that has not been impacted by humans - this is a natural outcome. Environmentally friendly therefore is a value laden term that means different things to different people, as such, it's a somewhat useless term if we're looking for something that describes, free of emotion, an action that is good for the environment or less damaging. As long as the producers of any goods or services made in the process of damaging the environment for resource extraction internalise their costs, then any potential environmental damage can be mitigated, or at worse for non-users, compensated for. The real effects of the negative consequences of man's utilisation of the environment result when costs are externalised ie borne by the wider community and non-users. The operating costs and associated profits in such a scenario do not reflect the true costs and users and producers are essentially being subsidised by non-players.
My point is more that people who wanted to invest capital into oil assets in America (to avoid the extensive sovereign risk in Saudia Arabia, Russia, China, Iran, Venezuela etc) were effectively not allowed to target the lower risk options first.
