3 ms·
Not an economy, but individual businesses. The better analogy in computer services would be if your e-commerce site made $100 per hour and took 1 kilowatt to r
by clock_tower 11y ago
Not an economy, but individual businesses.
The better analogy in computer services would be if your e-commerce site made $100 per hour and took 1 kilowatt to run, but then the price of electricity rose to $101 per kilowatt-hour. As soon as the price fell back below $100, you'd be back in business -- the same is true of the fracking companies as soon as the price of oil rises.
- SilasX 11y ago$101/kWh is a black swan event that would take down your competitors and customers just the same, "falling to the lower end of historical norms for oil prices" is not. Even so, if your business depends on some resource staying at a certain price, and you do not wish to couple your profitability to that price, you should buy options or forward contracts, as that's the benefit of modern financial instruments. Oil-intense businesses (like airlines) tend to hedge against big fluctuations like this.