Reasons why the orphan wells exist
Click here to view a large image

Click on image to enlarge.

Texas independent oil operator's time of near demise. 

From 1974 to 1978 world crude oil prices were relatively flat. The price ranged around  $14.00 per barrel . 

In 1979 and 1980 the Iranian revolution resulted in the loss of 2 to 2.5 million barrels of oil per day.  In 1980 as a result of the Iran/Iraq War, Iran and Iraq's crude oil production fell.  The combination of these two events resulted in crude oil prices more than doubling from $14 in 1978 to $35 per barrel in 1981
.

In Texas alone thousands of new individuals became investors in the oil business. 

The banks, wall street and most of the "smart money"  predicted that the price of oil would even go higher.
Thousands of new wells were drilled in Texas from 1979 thru 1986.
 
Many of them were completed as producing wells.

From 1982 to 1985 OPEC attempted to set production quotas low enough to stabilize prices. These attempts met with repeated failure as various members of OPEC would produce beyond their quotas. During most of this period Saudi Arabia acted as the swing producer cutting its production to stem the free falling prices. In August of 1985, the Saudis linked their oil prices to the spot market for crude and by early 1986 increased production from 2 MMBPD to 5 MMBPD.
Crude oil prices plummeted below $10 per barrel by mid year.

And what about inflation?    What cost $1.00 in 1978 did cost $1.36 in 1981.

Back in 1979 the oil operators  faced a another obstacle called "interest rates."
In 1979
(15.25%) and 1980 (21.50%)  the prime rate of interest in the U.S. In fact, the
recession/depression of 1991 can be considered a direct outgrowth of excessive interest.
The honest producer could not validate money fast enough.

The collapse of oil prices in 1986 wiped out many of the stripper wells and their operators. 
All related business was affected. Manufacturing, service and financial.
This was the onset of the banking crisis of the 1980's. 

On April 18,1977, the then President Jimmy Carter delivered a policy speech that  proposed to establish a Department of Energy. In that speech he outlined a series of proposals to make America "energy independent". Conservation was to be the cornerstone.   
"The energy producers deserve fair treatment, but we will not let the oil companies profiteer." That is a direct quote from that speech.   

In 1980, Our Congress saw an opportunity to tax. The Crude Oil Windfall Profit Tax Act
was  enacted. In 1988, Congress repealed the windfall profit tax with respect to crude oil  produced after August 1988.
By 1988 a lot of damage was already done to the domestic
oil  industry

May 18, 1982, the then President Reagan delivered a message to the congress that his administration
proposed to abolish the Department of Energy.

There has been no consistent domestic energy policy.
Our congress has been more concerned with voter dismay at the price of gasoline than it has been with long term energy independence.
"Special Interest" using the powerful tool of political contributions has made the policy. 

In 1986 the independent oil business become ill.  A situation over which the operators had no control. As a result there is today, thousands of holes in the ground, some orphaned some plugged and abandoned, with oil at the bottom of most.

The aftermath of the Kuwait invasion raised oil prices and halted the declining trend temporarily until 1992.  The US oil production suffered another major setback in 1998 and early 1999 when world oil prices approached $10 b/d. 

Now the Texas oil and gas business rides a boom of high prices, and refineries produce gasoline at peak capacity. America still imports more than 10 million barrels a day -
a quarter of the world's oil. 

Since 1985 the price of oil was just about what Saudi Arabia  wanted it to be.
OPEC, lead by Saudi Arabia, in collaboration with the major oil companies
and with US political considerations, made decisions that determined if
Texas independent oil producers make money or not!
Today, there are new are factors that will help determine the
price that Texas oil producers obtain.
So, what are these factors?  Next page. 

Page 2

Money In Oil, Tyler, Texas 903-561-1554