high gas prices = more oil?

It’s the undeniable truth about high gas prices. We gripe about it, we complain, we ask why big oil needs so much money. But the reality is that, as the prices go up, the oil companies are able to pursue technologies that are not possible at lower prices. In Texas, Cactus Schroeder is drilling for small “veins” of oil – veins so small that they are not worth the time or trouble of the big oil companies. Cactus digs oil wells that may produce 100,000 barrels of oil in their lifetime. He’s convinced that there is plenty of oil residing underneath the Texas soil, and I’m inclined to agree with him. Anyone who has ever driven across Kansas (as I have, numerous times) has seen many of the horsehead-shaped oil wells, also known as nodding donkeys. 100,000 barrels of oil may sound like a lot, but it’s not. It costs Cactus $500,000 just to drill the well, so divide that by the oil he hopes to get from the well (500,000/100,000) and every barrel must sell for at least $5 just to break even. Not every well produces 100,000 barrels, though – some produce far less. Some wells, called dry holes, produce no oil at all. Add enough profit to offset the cost of the dry holes and the wells that don’t pay for themselves, and it’s really only worth drilling if Cactus can sell the oil for a high profit. We might complain – but let’s remember that if it weren’t for those high prices, we might not have oil at all.