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<<<TiRien claims:"Those people completely miss the mark as they do not realize that more expensive oil cannot be used to produce more expensive oil.

I.e. they fail to realize that those marginal fields need a LOW oil price to stay marginal. If oil prices go up, they cease to be marginal and become too expensive to produce.">>>

Ummmm, no. No one is producing oil at a net energy loss. Energy costs are not that big of a chunk of production costs. Sure, if oil prices rise, production costs do too, but they do not do up nearly as fast as revenues. Obviously you do not own any production. I do.

My producing costs are around $25 a barrel. When oil was down in the $25 range were were able to cut production costs to about 21 a barrel and still keep them going. In late 80's,when prices really dropped we plugged some wells, some we got permission from the royalty owner to shut in, some on federal land we produced at a loss, hoping to survive until prices improved.

These same marginal fields became spectacularly profitable when prices ran up to $100+. Sure, our production costs climbed due to higher fuel costs, labor and equipment shortages etc, but the production costs never got above $30 a barrel. Wells that were making me $2-5 a barrel were suddenly making $70 a barrel. We drilled a bunch more of those crappy wells, and production in one area I operatein went up so much the pipelines couldn't handle it all.

Price entirely defines what is marginal. When prices go up, they don't become too expensive, they become more profitable
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