Written By: Nate T.
Colorado, a state that produces almost half a million barrels of oil a day, is looking to expand its regulations on how far oil retrieval facilities have to be from housing, schools and water supplies. This proposition will expand that distance from 500 feet from homes and 1000 feet from schools to half a mile away from both of those, severely cut into the land that these companies can frack in, including 90% of the land used by 3 companies: Anadarko Petroleum, Extraction Oil & Gas (XOG) and PDC Energy (PDCE). This would make it much harder for companies to obtain land in Colorado that they can use to retrieve the oil, increasing their marginal and average total cost, but due to oil companies outside of the state of Colorado, they have very little control over the market, meaning that the marginal revenue remains constant and, in conjunction with an increase in both marginal cost and average total cost, companies would be forced to leave the state of Colorado for their production or leave the market entirely and could cost the state of Colorado almost 150,000 jobs (current estimate is 147,800). Data also shows that the proposition would lower the overall oil production of the state by 54% over the next 5 years. Now this is relatively unimportant should the phenomenon stay within the state of Colorado but if other states or even countries were to begin instating similar policies with similar effects, we could see a drastic decrease in oil supply, driving prices much higher for consumers. However, this proposition is up for vote and may not even pass, let alone serve as the first domino in a chain of similar policies, should the people of Colorado vote against it. All in all, Proposition 112 will likely only affect oil companies in Colorado, if anyone at all.
Works Cited
Egan, Matt. "Will Colorado Deal the Shale Oil Boom a Blow?" CNN. Cable News Network, 05 Nov. 2018. Web. 06 Nov. 2018. https://www.cnn.com/2018/11/05/business/colorado-oil-proposition-112/index.html
Yes this is true that it will be harder for company's to buy land and fro people to expand land do to those new rules. It would be harder for people to start something up if they could and do to these things it would have a big impact on people and the economy.
ReplyDeleteThis piece is hard to talk about because no one can tell the future so we can't say for sure they will lose 54% of their oil in Colorado but no one knows when and how much exactly so If you incorporated some more details and information in this piece it would be a bit better
ReplyDeleteI think that oil will be around for a long long time. Clean energy is extremely expensive so it will take a while to transition from oil to other energy sources. The Obama Administration encouraged fracking but with environmental restrictions. This process is extremely efficient. And considering environmental policy is rather political lately, like the Trump administration repealing fracking restrictions last year, I doubt there could be any serious funding granted to renewable energy projects in the near future considering the hefty price tag and political polarization.
ReplyDeleteI like how you were comparing the individual firms to the whole oil industry which gives us a better picture of the struggles that both the individual firms and the industry faces. I would say, when mentioning other countries, it would have been a nice addition to see some analysis of foreign oil firms since the countries of OPEC are major players in the industry and contrasting their situation with our own would've been interesting to see and understand as it can show where those countries may be able to take advantage considering the burden this could put on local producers.
ReplyDeleteInstead of leaving the state, oil companies could entertain the notion of investing in renewable energy sources, as a few already have. Despite constant returns and relatively cheap maintenance, renewable sources of energy such as wind and solar have a large upfront capital cost, which future minded oil companies could start footing the bill for in order to gain constant and reliable returns further down the road.
ReplyDeleteA few interesting links on this:
https://www.greentechmedia.com/articles/read/report-for-majors-investigating-clean-energy-its-about-balancing-risk-and-r#gs.UKE7X0Y
https://www.fool.com/investing/2018/06/29/3-oil-companies-getting-serious-about-renewable-en.aspx
I agree with Ben that in place of lost oil resources, companies should look into substitutes such as wind farms and solar plants. In the long term, these renewable energy sources are the more economically sound option. Eventually, we will run out of oil, and at the rate society is guzzling oil, it's going to happen sooner than we think. We need energy sources that we can rely on. Wind and the sun aren't going to run out the way oil will.
ReplyDelete