As well, with rising fuel prices, the deep water sites quickly become uneconomical.
I just love this sentence.
Ok, what are the costs associated with deep water drilling and what percentage are they of the total costs? The actual percentage of the total does not matter, but for simplicity I do guess:
20% labor of platform crew
60% price of the platform (steel, construction)
20% fuel to place and operate the platform
for a total of, say, $1 billion
Now, the revenue of the platform is determined by the following:
100% fuel sold to the mainland
So, if we assume the platform breaks even at current prices, what happens if oil prices double? Well, 20% of total costs doubled, so the costs are now 20% higher than they were, so $1.2 billion (fuel now constitutes 33% of total costs). However, revenues are now 100% higher, or $2 billion, for a profit of $0.8 billion.
As this thought excercise demonstrates, if drilling an oil well is profitable today then higher oil prices will only make it even more profitable.