The "Drill, baby, drill" crowd appears poised for a reality check that should shake them beyond the results of November's elections, if recent comments from oil sector honchos are any indication. Those executives in essence are saying you can scream "Drill, baby, drill" all you like, but any response remains dependent on the people who actually do the drilling. And they are more interested in real world economics than political rhetoric.
Listen to EOG Resources CEO Mark Papa discussing his company's Bakken Shale production profile in this new environment December 2 with analysts at a Merrill Lynch conference in New York City. While assuring them that EOG can continue to turn a profit in the Bakken with oil at $50/barrel, he then pondered aloud whether it would make good business sense to actually continue producing there until oil prices rise again to a more profitable margin.
"If we believe oil is higher than $50 in the next two years," he asked rhetorically, "does it make sense to sell the oil today at lower prices?"
At the same time, half a world away, the OPEC brain trust was wrestling with the same dilemma of cutting production to maximize returns.
As lower prices hold and the panic subsides to "Drill, baby, drill," market forces in both free enterprise sectors and cartels sound adamant they must answer to a higher authority.
The roller coaster ride forecast by Duncan (of the Olduvai Theory) and others has just begun.