The Value of a Barrel of Crude Oil

Introduction I have been asked to talk to you about the value of a barrel of crude oil. I am going to do this in rather direct terms. This is not to be a philosophical discussion and, therefore, I am not going to enter into a long dissertation as to the many meanings of value. In the producing end of the oil business the basic commodity is a barrel of crude oil and its associated natural gas. In order to simplify the analysis, all of the factors influencing value are reduced to terms than can be expressed in dollars and cents per barrel of crude oil produced. It is well known that there is a wide variation in the profit to be obtained from finding, developing and producing crude oil, depending upon many variables. Each of the variables will be analyzed in detail in the following discussion. This analysis will cover the value of a barrel of crude oil to a producer that sells his crude at the well, and therefore our basic starting point will be the market price of a barrel of crude oil. For the purposes of this talk, I have prepared in outline that we will attempt to follow. Chart 1 The main purpose of this outline is to call to your attention the various sources of income and the costs of producing a barrel of crude oil. The figures shown are for purposes of illustration, and do not necessarily represent a particular or actual barrel of crude oil. The figures, however, are in proper proportion. See Chart 1.