Questions and Answers
What was the estimated cost per well drilled in 2006?
Which pair of companies merged to form ExxonMobil?
What factor has contributed to the increase in costs for exploration and production over the last three decades?
What was the primary reason for the increase in capital and exploration expenditure in the oil industry?
Signup and view all the answers
What is one consequence of rising oil prices since the 1970s?
Signup and view all the answers
Which company merged with Texaco to become Chevron Texaco?
Signup and view all the answers
How did the number of wells drilled change from 1980 to 2010?
Signup and view all the answers
What significant change occurred to BP Amoco in 2002?
Signup and view all the answers
How do variable costs in the oil industry typically compare to fixed costs?
Signup and view all the answers
What happens to the long-run average total cost (LATC) as production increases in natural monopoly industries like oil?
Signup and view all the answers
What other factors, besides cost structure, influence market structure in the oil industry?
Signup and view all the answers
What has been the trend in the total number of operating refineries from 1989 to 2008?
Signup and view all the answers
What process does refining in the oil industry involve?
Signup and view all the answers
What approximate percentage of capacity do most world refineries operate at?
Signup and view all the answers
Which aspect of the oil industry is still primarily under the control of major oil companies?
Signup and view all the answers
What is the typical outcome when the marginal cost curve intersects with the demand curve in the oil market?
Signup and view all the answers
What is the primary objective of secondary recovery methods in oil extraction?
Signup and view all the answers
What initiates the natural flow of oil to the surface in new fields?
Signup and view all the answers
Which factors primarily contribute to the fixed costs in oil production?
Signup and view all the answers
What role do advanced techniques like 3-D visualization modeling play in the oil industry?
Signup and view all the answers
During the production process, what occurs after oil is extracted from the well head?
Signup and view all the answers
What is a major challenge of enhanced oil recovery (EOR)?
Signup and view all the answers
How is oil pricing theoretically determined?
Signup and view all the answers
Which of the following is NOT a part of the oil production process mentioned?
Signup and view all the answers
What is the first stage of the oil and gas industry?
Signup and view all the answers
Which technology is highlighted as the most useful in the exploration stage?
Signup and view all the answers
What is a significant challenge in the exploration and development stage of the petroleum industry?
Signup and view all the answers
What is a necessary step after initial exploration to ensure the presence of oil?
Signup and view all the answers
Which of the following improvements aim to reduce exploration and production costs?
Signup and view all the answers
What aspect does not typically factor into oil and gas market structures?
Signup and view all the answers
What is a notable feature of the capital expenditures in the oil industry over the years?
Signup and view all the answers
Which of the following is not a part of the oil and gas industry structure?
Signup and view all the answers
Study Notes
Structure of the Oil and Gas Industry
- The oil and gas industry consists of multiple stages: exploration and development, production, refining, transportation, and marketing.
- Historical market structures and pricing mechanisms illustrate how oil prices are determined.
Exploration and Development
- Exploration involves geological and geophysical surveys, with seismic surveys being the most effective.
- Exploration remains a complex stage due to economic and technological challenges, requiring integrated seismic programs and advanced data analysis.
- New technologies such as 3-D and 4-D seismic imaging, basin modeling, and slim-hole drilling enhance efficiency and reduce environmental impact.
- Drilling a test well is expensive, with costs per well significantly increasing over the last three decades, particularly in traditional regions versus new areas like Africa and Asia Pacific.
- Major oil company mergers (e.g., BP and Amoco, Exxon and Mobil) have influenced industry structure.
Production
- Production seamlessly links with exploration, with early oil flow relying on natural reservoir pressure.
- As natural flow decreases with cumulative extraction, secondary recovery methods (water or gas injection) are employed.
- Enhanced oil recovery (EOR) techniques aim to maximize oil extraction rates and reduce unrecovered hydrocarbons.
- The production process involves multiple stages from wellhead to export, ensuring effective separation and compression of gases.
- Long-run average total cost (LATC) tends to decline as production increases, characterizing natural monopoly conditions found in expansive oil fields.
Refining
- Refining transforms crude oil into various finished products through physical and chemical processes.
- The global number of refineries increased from 646 in 1989 to 700 in 2008, spread across 120 countries.
- The oil industry has transitioned post-1970s, with national oil companies gaining control over operations, while refining remains mostly under oil companies or joint ventures.
- Refineries generally operate at about 85% of their refined capacity.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz explores the cost structure and market dynamics of the oil and gas industry. It highlights how variable and fixed costs influence the long-run average total cost, particularly in natural monopoly scenarios. Additionally, it examines the role of market size and government policies in shaping the industry's landscape.
