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Energy Myths
INVESTOR'S BUSINESS DAILY ^ | 7/3/2008 | IBD Editorial

Posted on 07/06/2008 12:13:17 PM PDT by Donald Rumsfeld Fan

• "Even if drilling works, it'll take a decade or more for the oil to flow."

This is quite an argument coming from the Democratic Party, which has made keeping oil off the market a linchpin of its energy policy for decades.

If President Clinton hadn't vetoed the idea of drilling in ANWR back in 1995, we'd have that oil on the market today. Ditto if Congress had approved ANWR drilling in 2002, when President Bush requested it.

Even so, the larger point is false anyway. New oil will be flowing in some cases within three to four years, according to industry estimates. But the impact on prices will be immediate. Why? Because markets would suddenly have to discount future oil prices for the expected gain in oil supply. That would cause oil prices, especially in futures markets, to drop.

By the way, this isn't just conjecture. President Reagan, within a week of his inaugural in 1981, removed domestic controls on oil. Energy prices began tumbling almost immediately, with oil falling from $34 a barrel in early 1981 to just $11 by 1986.

It worked before, and it'll work again

(Excerpt) Read more at investors.com ...


TOPICS: Business/Economy; Government
KEYWORDS: anwr; congress; drilling; energy; energyoil; myths
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Drill now and prices will start to fall immediately .


1 posted on 07/06/2008 12:13:17 PM PDT by Donald Rumsfeld Fan
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To: Donald Rumsfeld Fan

If it is going to take 10 years,
shouldn't we get started?

Drill here, drill now, pay less


2 posted on 07/06/2008 12:22:04 PM PDT by NonValueAdded (If it is going to take 10 years, shouldn't we get started? Drill here, drill now, pay less.)
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To: Donald Rumsfeld Fan
Drill now and prices will start to fall immediately .

Order the uncapping of existing wells that were capped 20 - 30 years ago that were pumping just fine back then, it only takes a few weeks to get them back into production.

If a general directive to uncap the existing wells were to come from the White House today, prices would start to fall by Tuesday.

3 posted on 07/06/2008 12:25:51 PM PDT by TLI ( ITINERIS IMPENDEO VALHALLA)
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To: Donald Rumsfeld Fan
The average profit, as we've noted before, is around 8 to 9 cents to the dollar. That compares with about 7 cents to the dollar for manufacturers and more than 15 cents to the dollar for computer makers. In short, oil profits aren't out of whack with the rest of industry. What doesn't get said is that while oil companies have profit margins of about 8%, about 12% of the price of a gallon of gas goes to the government in the form of taxes. When indirect taxes are included, the share is even higher. So who are the real price-gougers? From 1981 to 2006, the oil industry made $867 billion in profits. Yes, that's a lot. But over that same time, they paid total taxes of $1.2 trillion, Energy Department data show. And that doesn't include taxes of $519 billion paid to foreign countries. Please remember that the next time a politician vows to hit "Big Oil" with a windfall profits tax or some other idea. The tax won't be paid by the oil company; it will be paid by you, the consumer.
4 posted on 07/06/2008 12:27:01 PM PDT by SandRat (Duty, Honor, Country! What else needs said?)
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To: TLI
Order the uncapping of existing wells that were capped 20 - 30 years ago that were pumping just fine back then, it only takes a few weeks to get them back into production. If a general directive to uncap the existing wells were to come from the White House today, prices would start to fall by Tuesday.

That makes no sense whatsoever. Old wells get uncapped all the time if they are economically viable. Why would you have the president order unprofitable wells be uncapped? Would you have him order other businesses to engage in unprofitable production?

5 posted on 07/06/2008 12:28:27 PM PDT by Ron Jeremy (sonic)
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To: Donald Rumsfeld Fan; All
What has become apparent to me from the years I've been reading about the oil/energy problem is that the Democratic Party has been obstructionist to the nth degree. They do not want to explore for oil. They do not want to drill. They do not want nuclear power. They do not want natural gas. It's almost like they want a calamity! Then it occurred to me, yes they want a calamity! They believe it will be to their advantage to create a catastrophe. They can blame it on the market, evil corporations, capitalism, etc. They will then go in with government programs to fix the problems that they are mostly responsible for creating. That has been the plan all along. More government! That is what the Democrats are all about.
6 posted on 07/06/2008 12:41:16 PM PDT by truthguy (Good intentions are not enough!)
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To: TLI

“Order the uncapping of existing wells that were capped 20 - 30 years ago that were pumping just fine back then, it only takes a few weeks to get them back into production”

Tell us all about these mythical “capped” wells. Include some sources too


7 posted on 07/06/2008 12:41:54 PM PDT by Figment ("A communist is someone who reads Marx.An anti-communist is someone who understands Marx" R Reagan)
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To: TLI

Good point. I’ve wondered about old oil wells that have been capped. I thought many were capped because their production tapers off as time goes on. But if there is still recoverable oil in these wells, let’s get started. In the supply/demand equation, this can only help because then supply is increased.

Are Democrats/liberals/radicals in favor of this? They should be because Democrats got p.o.ed because oil companies aren’t drilling enough on land already leased for that purpose, and they want to see that happen before considering new leases for oil drilling.


8 posted on 07/06/2008 12:41:55 PM PDT by Dilbert San Diego
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To: Ron Jeremy
That makes no sense whatsoever. Old wells get uncapped all the time if they are economically viable. Why would you have the president order unprofitable wells be uncapped?

You don't have to order people to make a profit. I have confidence that at $140 per barrel somebodys going to smell the coffee.

9 posted on 07/06/2008 12:44:41 PM PDT by Donald Rumsfeld Fan ("Sincerity is everything. If you can fake that, you’ve got it made." Groucho Marx)
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To: SandRat

Ronald Reagan used to make the point that businesses don’t actually pay taxes, but that the customer who buys whatever goods and services are produced by the business are the ones who pay any business related taxes. The businesses pass along any tax as a cost of doing business.

And Ronald Reagan was attacked for making that point, because he was allegedly in bed with big business and against the “little guy”.

But the laws of economics are as immutable as the laws of physics. No business can stay in business indefinitely if they aren’t making a profit. And they can’t just “eat it” if gov’t comes along and decides to levy new taxes against business. Whether it’s payroll taxes on the hired help, business license fees, property taxes, exise taxes, or any other tax, you the customer, are paying those taxes through higher prices on everything you buy.


10 posted on 07/06/2008 12:45:51 PM PDT by Dilbert San Diego
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To: truthguy
They can blame it on the market, evil corporations, capitalism, etc. They will then go in with government programs to fix the problems that they are mostly responsible for creating. That has been the plan all along. More government! That is what the Democrats are all about.

Makes sense.

11 posted on 07/06/2008 12:47:06 PM PDT by Donald Rumsfeld Fan ("Sincerity is everything. If you can fake that, you’ve got it made." Groucho Marx)
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To: Figment

A valid question. A post last week mentioned that these are small wells of low productivity.


12 posted on 07/06/2008 12:49:37 PM PDT by RightWhale (I will veto each and every beer)
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To: Dilbert San Diego

So true, yet the Dim-O-RATS can’t understand that. They think tax payments comes out of some hidden corporate stash.


13 posted on 07/06/2008 12:54:00 PM PDT by SandRat (Duty, Honor, Country! What else needs said?)
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To: Donald Rumsfeld Fan

DRILL HERE DRILL NOW AND KEEP DRILLING.
SPOIL THE SOCIALIST AGNEDA TO DESTROY AMERICA BY DENYING IT OIL.


14 posted on 07/06/2008 1:00:23 PM PDT by SECURE AMERICA (Got Freedom ? Thank a Veteran...... Want to keep Freedom? Don't vote Obama)
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To: TLI
I just read where there are some 240,000 existing capped wells that are not being tapped right now.
15 posted on 07/06/2008 1:02:06 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: Dilbert San Diego

“The businesses pass along any tax as a cost of doing business.”

People say that all the time, but there’s a huge problem with it. A monopoly could sure pass along any tax increase, or any other increase in expenses. But in a competitive economy, what if one producer of a good or service is much more efficient than another producer of the same good or service? The inefficient producer probably can’t pass along tax increases because the increased price would make him less competitive, or non-competitive with his more efficient competitor.

Can a corporation also, automatically pass on all increases in salary and wages, in material or raw material costs, and all the other expense of doing business.

It’s a myth, or a half-truth at best, that any and every increase in business operating expenses can be passed on to the consumer.

And, also, if taxes increases can be passed on, on and on, why all talk about reducing corporate taxes? How would that make corporations more competitive if they can just pass the increases on?

They can’t just pass the increases on automatically.


16 posted on 07/06/2008 1:04:29 PM PDT by Will88
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To: truthguy
Exactly! I have been posting this same concept for weeks now.!
The rats want socialism/Marxism at any cost! Why else would they use enviro lawyers to block every avenue there is for drilling, nukes,refineries, etc.it's not coincidence at all.
17 posted on 07/06/2008 1:05:36 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: RightWhale
I read that 10 barrels per day at $140. is enough to break even.
18 posted on 07/06/2008 1:07:19 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: Donald Rumsfeld Fan
Gull Island -
 
The big event in that three-year period was in 1977 when an Atlantic Richfield oil executive told him, “We have just drilled into the largest pool of oil in North America—[and] in the world!”

That pool was Gull Island. It was said that there was enough natural gas to supply America for 200 years. But to this day, “not one drop” of that oil has been released to American refineries, Williams said.
 
fact or fiction?
 
 
 
 
 

19 posted on 07/06/2008 1:08:48 PM PDT by LomanBill (A bird flies because the right wing opposes the left.)
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To: rodguy911

10 bpd sounds about right for most of these small wells. It’s probably breakeven, but won’t make a dent in the supply.


20 posted on 07/06/2008 1:10:45 PM PDT by RightWhale (I will veto each and every beer)
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To: LomanBill
Like minds! I just posted gull island on another thread and was immediately blasted as a conspiratorialist.

I don't give a dam about the conspiratorial aspects of Gull Island, the controversy or any of that shi_.

Just is there oil there or not!! And are 4 major league wells now capped there that could produce lots of oil.That's all I want to know. Screw the rest.

21 posted on 07/06/2008 1:12:42 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: RightWhale
IMHO it all helps.
You mean that if a substantial proportion of 240,000 wells will produce 10 barrels or more a day it doesn't help?
Sounds strange to me.
22 posted on 07/06/2008 1:14:51 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: Figment

Every time I see the reference to “capped wells” at this forum, I cringe.

That’s not the terminology in the oil business. Unused wells are either “plugged” or “temporarily abandoned”.

Plugged usually means pumping a few tons of concrete into them, while temporarily abandoned means setting bridge plugs at various depths. Most states limit the amount of time you can keep a well temporarily abandoned.

The notion that there are thousands of “capped” wells which would magically produce a bunch of oil if only they were “uncapped” is simply wrong. While it is certainly possible to re-enter an abandoned well and attempt something new, there are limitations depending on well design and the condition of the downhole equipment.

No oil company is keeping a “capped” well capable of producing oil in anticipation of the White House suggesting that they “uncap” it.


23 posted on 07/06/2008 1:17:49 PM PDT by Dog Gone
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To: Donald Rumsfeld Fan
President Reagan, within a week of his inaugural in 1981, removed domestic controls on oil. Energy prices began tumbling almost immediately, with oil falling from $34 a barrel in early 1981 to just $11 by 1986.

pitchforks might be useful now.

24 posted on 07/06/2008 1:17:58 PM PDT by alrea (ethanol stops global warming with starvation)
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To: Donald Rumsfeld Fan; informavoracious; larose; RJR_fan; Prospero; Conservative Vermont Vet; ...
+

Freep-mail me to get on or off my pro-life and Catholic List:

Add me / Remove me

Please ping me to note-worthy Pro-Life or Catholic threads, or other threads of interest.

There is a clear moral imperative to drilling now and drilling here. People are dying because of the left's policies. Act now!

25 posted on 07/06/2008 1:19:01 PM PDT by narses (...the spirit of Trent is abroad once more.)
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To: Dilbert San Diego

Only a certified moron would even begin to believe a business doesn’t pass on every cent of any tax it is forced to pay.


26 posted on 07/06/2008 1:38:01 PM PDT by lexusppd
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To: Figment
Tell us all about these mythical “capped” wells. Include some sources too

Actually the information is easily available so next time I am just gonna tell you to do your own homework. But here is a hint!

G-O-O-G-L-E ... S-E-A-R-C-H

Check into it, ok?

That being said, apparently there are about 400,000 capped wells in the US.

Here is an excerpt...
"It will also give new life to the capped wells in the U.S., which number approximately 400,000. Just think about the possibilities: there is an estimated 40 years of oil in capped wells in the U.S. at 21,000,000 barrels a day in usage."

And for being such a smartazz I'm gonna make you block and copy. No handy links for you!

http://findarticles.com/p/articles/mi_m5CNK/is_2006_Dec_4/ai_n24996550

http://www.npr.org/templates/story/story.php?storyId=5147602

http://www.presstelegram.com/business/ci_8672275

27 posted on 07/06/2008 1:40:58 PM PDT by TLI ( ITINERIS IMPENDEO VALHALLA)
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To: Will88

Perhaps not automatically but a company must be profitable or in the end it dies. If taxes are increased 10% then either the company eats the increase in expenses by cutting their bottom line or else sheds employees, charges them more for their medical, fore goes raises or something else to make up for the attack on profits caused by an increase in taxes. In that way the taxes ARE passed along to the consumer in one way or another.


28 posted on 07/06/2008 1:43:17 PM PDT by lexusppd
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To: Donald Rumsfeld Fan
I have confidence that at $140 per barrel somebodys going to smell the coffee.

Most of the info is based on numbers from 2006. That is when the new technology was viable. At todays prices, Whoo Hoo!

29 posted on 07/06/2008 1:43:33 PM PDT by TLI ( ITINERIS IMPENDEO VALHALLA)
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To: LomanBill

Try coming up with an explanation why Atlantic Richfield would drill into the largest “pool of oil” in the world and then leave it.


30 posted on 07/06/2008 1:44:11 PM PDT by Dog Gone
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To: rodguy911
I just read where there are some 240,000 existing capped wells that are not being tapped right now.

Yep. At least that many.

31 posted on 07/06/2008 1:44:38 PM PDT by TLI ( ITINERIS IMPENDEO VALHALLA)
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To: TLI
Great post, can't recall where I read it but I saw 240,000 plugged wells(don't want to upset anyone here)It's hard to imagine unplugging them(whether its 400 or 240,000) could not be beneficial to the countries needs.
32 posted on 07/06/2008 1:47:53 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: rodguy911
I read that 10 barrels per day at $140. is enough to break even.

10 barrels is the criteria that was used to stop production and cap the well. That 10 a day is with 30 year old technology and pricing. New production methods can at least double that and what with the $100 + prices? We need to make a REALLY big deal out of this as it blows away the "why bother to drill / no results for 10 years" krap argument from the communists.

33 posted on 07/06/2008 1:49:11 PM PDT by TLI ( ITINERIS IMPENDEO VALHALLA)
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To: rodguy911
I read that 10 barrels per day at $140. is enough to break even.

I find that hard to believe. Got a source?

34 posted on 07/06/2008 1:54:03 PM PDT by Popman (McCain as POTUS is odious, Obama as POTUS is unthinkable.)
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To: lexusppd

“In that way the taxes ARE passed along to the consumer in one way or another.”

That scenario passed the increase along to the company’s employees in the form of compensation or benefits reductions. You pass increases along to the consumer mostly in terms of price increases, or providing less for the same price of packaged goods, as so many food producers have done over the years.

But a company simply cannot pass all increases in costs along to the consumer. That’s a myth in a competitive environment. Consumers can forgo the price increase and find other suppliers, or find substitutes for the product that increased in price to cover increased taxes or other costs. The consumer has choices.

I’ve heard Boortz say this for years and he’s wrong. One caller began presenting this explanation to him and Neal just cut the caller off and wouldn’t discuss it.


35 posted on 07/06/2008 1:55:47 PM PDT by Will88
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To: rodguy911
240,000 using modern technology to produce 20 a day (or more)is 4,800,000 a day. For a year it is 1,750,000,000.

Of course the amounts will be somewhat less than that due to all 240,000 capped wells will not come back online at the same time, many of them are down a day or two a month for maintenance, etc.

Still, it is a significant number both for actual supply and for psychological value.

36 posted on 07/06/2008 2:00:49 PM PDT by TLI ( ITINERIS IMPENDEO VALHALLA)
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To: LomanBill

let me guess.......fiction


37 posted on 07/06/2008 2:05:48 PM PDT by Donald Rumsfeld Fan ("Sincerity is everything. If you can fake that, you’ve got it made." Groucho Marx)
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To: TLI
"stripper well" is a name for anything at 10 bbls/day OR BELOW. This may mean 1 bbl/day or less. There was no general order to cap wells of any particular flow. The costs of keeping a well going are maintenance of the well, the pipe to a collecter line (may be 50 feet, or 10 miles), etc.

Thus, a 10 bbl/day may still not be economical, and a 1 bbl may have become so. The number of "stripper wells" can be looked up, but IIRC it has been in the hundreds of thousands. The 240K figure, is probably someone's account of the difference of how many producing at that level at some past time, and today.

Also, some have gone completely dry -- that's why production stopped.

IN short, the price will do a fine job of reopening the ones that are economical, but don't expect a huge gusher from it -- look at the total national figures -- production has picked up a couple of hundred thousand bbls /day, I think.

Google "monthly energy review" + petroleum

38 posted on 07/06/2008 2:09:51 PM PDT by BohDaThone
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To: rodguy911

As a general rule, you can only get about 50% of the oil
out of the ground. When it costs more to pump than the oil, what there is, is worth, you stop. EROEI


39 posted on 07/06/2008 2:09:55 PM PDT by OregonRancher (Some days, it's not even worth chewing through the restraints)
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To: Popman
I read that 10 barrels per day at $140. is enough to break even.

I find that hard to believe. Got a source?

Barrels per day at $140 sounds pretty good to me. That's $511,000 annual income from one well. Not bad.

40 posted on 07/06/2008 2:11:10 PM PDT by Donald Rumsfeld Fan ("Sincerity is everything. If you can fake that, you’ve got it made." Groucho Marx)
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To: Popman
Nah. Can't recall. But I did dig this one up.

http://www.Rense.com/general82/gull.htm

41 posted on 07/06/2008 2:11:12 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: TLI

Makes sense to me.


42 posted on 07/06/2008 2:12:15 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: TLI

It’s unlikely that anyone is plugging a well producing 10 barrels of oil a day in today’s price environment.

However, re-entering a well which MIGHT be capable of producing that much is going to cost probably around $300,000. Of course, you’re going to have to pay a royalty percentage to the landowner for every barrel you produce, plus pay severance, ad valorem, and income tax for every barrel.

Then you’re going have to pay a fee to someone to pick up those barrels and take them to a refinery. That’s after you pay to install tanks near the wellhead to store the oil that is produced because trucks won’t be lining up every minute to pick up the next quart of crude you bring to the surface.


43 posted on 07/06/2008 2:12:35 PM PDT by Dog Gone
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To: OregonRancher
Gotcha, also makes sense, from the looks of it the higher the price of oil goes the more wells that might be unplugged.
44 posted on 07/06/2008 2:14:21 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: Donald Rumsfeld Fan
That's 10 barrels per day at $140 sounds pretty good to me. That's $511,000 annual income from one well. Not bad.
45 posted on 07/06/2008 2:14:45 PM PDT by Donald Rumsfeld Fan ("Sincerity is everything. If you can fake that, you’ve got it made." Groucho Marx)
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To: Dog Gone
Bearing all that in mind, is it likely that, if the price stay at $140 or more, a truck might stop by there once or twice a month to picks up the small amounts?
46 posted on 07/06/2008 2:16:40 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: rodguy911

If there are other wells that justify a truckload, they’ll come as often as makes sense to them. The contracts an operator signs essentially require a pickup of oil before the tanks get full, but the tanks are pretty dang big.


47 posted on 07/06/2008 2:23:15 PM PDT by Dog Gone
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To: Dog Gone
gotcha thanks very much for the help! Just feeling my way through this topic.
48 posted on 07/06/2008 2:43:14 PM PDT by rodguy911 (Support The New media, Ticket the Drive-bys, --America-The land of the Free because of the Brave-)
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To: Donald Rumsfeld Fan
That's $511,000 annual income from one well. Not bad.

It's great, except you have to factor in all the deductions and expenses.

Not only are there all the taxes, royalties, and regulatory compliance costs, but there are operating expenses. A ten barrel a day well isn't flowing to the surface by itself. It has a $100 thousand pumpjack. Maybe more or less depending on the depth where the oil is coming into the wellbore.

It doesn't get to the surface for free.

If you have to schedule a workover rig to go out and work on that well making $500,000 a year more than once a year, you're going to go broke.

49 posted on 07/06/2008 2:48:09 PM PDT by Dog Gone
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To: RightWhale

I grow up where the first oil strikes went through after Drake’s well. There were old uncapped wells all over the place. There was methane coming out of most of them an a low rate. The ones that you could see down into usually had debris and dead snakes and raccons at the bottom.

At the end of WWII when surplus army trucks were available that could go through the brush and woods, guys would put a pump and barrels on the back of the truck and drive around and clean out the wells and pump them. At that time oil brought $8 a barrel at the back dock and day labors in the factories got less than $2/hour. An old well would put out from a barrel/week to 5 or 10 barrels/day. The guys, generally ex-soldiers liked the work, and they made a living wage. I suspect some of them are still doing in.

I talked to a guy with a barrel on the back of his jeep one day during hunting season. He liked doing it and it brought in extra money.

My 2 cents.


50 posted on 07/06/2008 4:04:30 PM PDT by Citizen Tom Paine (Swift as the wind; Calmly majestic as a forest; Steady as the mountains.)
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