Rising costs become more important factor in oil price

Inflation nibbles away at profit; $40 isn’t impressive.

… While prices remain well above the infamous $10 oil Alaska faced and survived in 1999, many in the industry say $40 today doesn’t buy what it bought just a few years ago.

“The fundamental cost of our business has changed over the past couple of years,” Jim Bowles, president of Conoco Phillips Alaska, told members of the Resource Development Council during their annual conference in Anchorage in mid-November.


At the same event, outgoing BP Exploration (Alaska) Inc. president Doug Suttles estimated oil industry costs have increased 15 to 20 percent per year for the past few years.

Costs associated with new facilities at oil and gas fields have risen 9.2 percent over the past six months, according to the Upstream Capital Costs Index, published twice each year by the affiliated consulting firms IHS and Cambridge Energy Research Associates.

The index shows oil-field costs doubling since 2005 after several years of only slight growth. A piece of equipment costing $100 at the start of the decade now costs $230.

Anchorage Daily News