I agree with jhm, a shortage of, and outdated refiners are responsible, to a large degree for our oil prices.
Having invested in a few "holes," I think Ace is a little off in his comment about "it not being unusual for an oil company to invest 500 Million in a hole." That may ring true for a field of holes, of for off shore drilling, but a single hole can cost as little as 200K, some even cheaper. I know of one such well, when drilled it cost a group of 10 investors $3,800. each. The well hit, it's beginning production was 278 barrels a day, after regulated back by government rules, it stabilized at 220 barrel a day. It has been pumping for several years now. I had an opportunity to invest in this one, but didn't........what do they say about hind site?
All wells drilled do not produce, or the production is so low that it is not cost effective to pump the oil. In any oil field, there are always wells that produce natural gas, but no oil. Many of these are capped for future reserve. I know of several wells that were drilled in the 50s and capped because they only produced 20 barrels a day, at that time it was not cost effective to pump them, so they were capped off. In the mid-eighties they were opened up and pumping begin. Keep in mind, when a well is being pumped a large percentage of what comes out of the ground is water. The well may appear to be money-maker, but after the oil is separated from the water it may not be worth the cost.
Many things influence production, and without knowing the details and history of a well, or field, if is awful hard to second guess management for stopping production. I am not standing up for the oil companies, just attempting to clarify the situation.