I watched an interview of Donald Trump this evening:
I’m all for his ambition but I believe he is pandering, to a degree, to the general public that have little knowledge of economics. He makes the statement in the above video that he “thinks it could go, with proper leadership, down to $40 a barrel”.
The problem with this is that, according to Harold Hamm (America’s richest oil man and CEO of Continental Resources), oil needs to be at least $50 per barrel in order to earn a 20% return on his capital investment. In other words, he’s not interested in anything less than 20% which is, in my opinion, reasonable.
State and Federal taxation on oil production is the main issue that needs to be changed in the U.S. before America can even think of being self sustainable. Two years ago (2009) you were hard pressed to find any oil production going on to any great degree and the reason was, oil was $53 per barrel and under. When oil hit $70, companies such as Continental Resources started a large buying campaign of leaseholders interests and, in regards to the Bakken Shale (one of the largest oil reserves in the Unites States), an oil boom started to take formation.
As Donald Trump states, an important issue is OPEC’s price fixing and that issue needs to be addressed – but if the U.S. wants to be self sustaining, state and federal taxation that restrict companies from having an economic interest in commencing production at anything less than $50 per barrel needs to be addressed. You could always ask the land owner’s to accept less than $25 per acre for lease-rights…but don’t hold your breath. It’s impossible for America to be oil independent without the consent of the leaseholders. For me, $25 per barrel, which is roughly what a leaseholder would receive if oil was at $40 per barrel, just isn’t going to cut it.
