4 ms·

It can't be priced below the cost of extraction (not without subsidies anyway).

• JumpCrisscross 7y ago
  > It can't be priced below the cost of extraction "Cost of extraction" is a fuzzy term. If it costs $100 to set up a well that lasts 10 years and $1 to pump 1 barrel of oil a year, then is the economic cost is around $11 per barrel (loosely estimated) and the marginal cost $1 per barrel. This is how an existing well can price below the economic cost of extraction but above the marginal cost. It doesn't make sense to compete with them by setting up new pumps. But pumps last a long time, and there are a lot of pumps out there.
  • ThomPete 7y ago
    For oil the cost of extraction isnt as simple as you seem to imply. The diversity of what oil can be used for and the value of those things, far exceed to the cost of extracting it. No other material is as valuable and diverse as oil.
    • JumpCrisscross 7y ago
      > The diversity of what oil can be used for and the value of those things, far exceed to the cost of extracting it This is a statement about demand, not cost. Nobody is saying oil is going to zero. And the cost curve for oil production varies greatly from well to well. Many wells are already extracting at total costs above price.
      • ThomPete 7y ago
        The cost needs to be divided out on other things than just for energy, thats the point.
        • JumpCrisscross 7y ago
          > The cost needs to be divided out on other things than just for energy A barrel which costs $50 to produce will cost $50 to produce regardless of its use. There is no "dividing out" costs.
          • ThomPete 7y ago
            Of course there is as the cost goes to other things than for energy which is the comparison. Its not $20 per area oil can be used, its $20 divided out on all the things its used for.