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That statement is false. It entirely depends on how fast you sell it. If you dump it all on the market at once, it can go way way below $10. Or you can take it

That statement is false. It entirely depends on how fast you sell it. If you dump it all on the market at once, it can go way way below $10. Or you can take it slow and not affect the price much at all.

stardek 10y ago
Any idea what the expected reaction would be if you sold it slowly but everyone knew that you had a massive reserve sitting in a warehouse somewhere ready for sale?
ChuckMcM 10y ago
Technically the statement is accurate, but I understood that you disagreed with the hypothetical. That said, there is a lot of evidence and history that supports the notion that OPEC only managed to keep oil prices high by threatening member states with retaliation if they under cut the "standard" price. And at the same time, people who were in a position to undercut that price (Venezuela, Russia, Brazil) did so in order to get more foreign currency faster. It is always a balance of incentives. The market clearly will buy oil at lower prices if given the opportunity. So one could imagine an act of economic warfare where the oil and gas reserves were developed as quickly as possible and shipped to Europe at a steep discount to cut into the revenues Russia makes selling oil and gas. Thus putting a huge crimp in their economy which makes their military spending cut into their social programs more deeply causing internal unrest and dissatisfaction. That certainly would not be in the best interests of the companies pulling the oil out of the ground, but it could be in the best interests of the US policy makers. My original point was that the $900B number was specious, you cannot take the 'estimate of reserves in barrels' x 'the spot price of oil' and call it the 'value'. The quantity is material to the commodity price on the market and so moving it through the market will change the net value.

stardek 10y ago

Any idea what the expected reaction would be if you sold it slowly but everyone knew that you had a massive reserve sitting in a warehouse somewhere ready for sale?

ChuckMcM 10y ago

Technically the statement is accurate, but I understood that you disagreed with the hypothetical. That said, there is a lot of evidence and history that supports the notion that OPEC only managed to keep oil prices high by threatening member states with retaliation if they under cut the "standard" price. And at the same time, people who were in a position to undercut that price (Venezuela, Russia, Brazil) did so in order to get more foreign currency faster. It is always a balance of incentives. The market clearly will buy oil at lower prices if given the opportunity. So one could imagine an act of economic warfare where the oil and gas reserves were developed as quickly as possible and shipped to Europe at a steep discount to cut into the revenues Russia makes selling oil and gas. Thus putting a huge crimp in their economy which makes their military spending cut into their social programs more deeply causing internal unrest and dissatisfaction. That certainly would not be in the best interests of the companies pulling the oil out of the ground, but it could be in the best interests of the US policy makers. My original point was that the $900B number was specious, you cannot take the 'estimate of reserves in barrels' x 'the spot price of oil' and call it the 'value'. The quantity is material to the commodity price on the market and so moving it through the market will change the net value.