The oil industry suffered hard times recently and faces the prospect of equally difficult times in the near future. Some of the problems arise from conditions beyond the control of an individual company, but others arise from the methods employed in the analysis and management of petroleum investments. Faced with pessimistic price forecasts at present and, given the limitations of the methodologies used to evaluate such projects, current investment decisions may be hastening the uneconomical waste of companies and nations resources. The cause of the inefficient, unprofitable production of such resources and ways to avoid the untimely depletion of our scarce resources are outlined in this paper. The problem is introduced first, limitations identified, and several correcting methods presented. Each is illustrated with one or more examples.

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