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Every producer is dependent on high prices of their product, whether they sell oil or apples. It is just property of some products that it takes time to scale p

Every producer is dependent on high prices of their product, whether they sell oil or apples. It is just property of some products that it takes time to scale production up after it was scaled down. It is also difficult to scale production of apples, because, you know, once you shut it down it takes multiple years to grow them again, but this does not imply any particular problem with the producer. Now, when it comes to setting up the prices, which would normally be called anti-competitive, the rules do not apply when you are large and important enough. We also kind of grandfathered in the situation, it's been running for over half a century now. If these were coalition of almost anything else, there would definitely be an outcry. People do need to be reminded that the way the world works is whole lot different from idealistic notions. The rules we set are not and cannot be objective, they are just an optimization from constant blundering through reality.

_ph_ 7y ago
The problem with oil is, that the costs of production are very different across many countries. While in Saudi Arabia they make a profit at $10/barrel, many other locations require 30-50$/barrel to be profitable.
- lmilcin 7y ago
  I don't see that as a problem. You use what you have. As a country you have some resources and you need to learn make best use of them. Norway is producing gas at a very substantial cost, yet it was able to save a huge amount of money and current situation is largely a speedbump rather than catastrophe. It seems the problem is not with the costs of production but rather maturity of the country that wields the power over the resource, whether it understands that a) they are largely dependant on it, b) it is not given that tomorrow the prices will be the same, c) it will run out some day and d) it is easy to spend money now but actually you have to be frugal to save them for when it runs out.
  - nogabebop23 7y ago
    Noraway's costs are actually about middle of the road. Higher than middle east, N. Africa , S. America but much lower than N. America and the rest of Europe. This is impressive when you account for their environmental standards and relatively challenging locations. Their huge savings is the combination of saving but also very high cost of living & taxation. The state provides a lot but also places high taxes on everything. I live in Alberta where we have relatively low taxes and no oil savings. We've been boom/bust for our entire existence, but one huge difference - we've subsidized huge parts of the entire country during those good times. Those transfer payments add up to an incredible amount of money.
- frank2 7y ago
  The Saudi royal family can make a profit at $10/barrel for a few years, then they lose control of the country and the oil because they had to stop most of the bribes (social services, etc) they were paying the population to continue to go along with the regime. (The Russian government is in a similar situation to some extent.) But yeah, someone in Saudi will continue to sell the oil, maybe after a few months or a few years of chaos, even if they can only get $10/barrel.

_ph_ 7y ago

The problem with oil is, that the costs of production are very different across many countries. While in Saudi Arabia they make a profit at $10/barrel, many other locations require 30-50$/barrel to be profitable.

lmilcin 7y ago
I don't see that as a problem. You use what you have. As a country you have some resources and you need to learn make best use of them. Norway is producing gas at a very substantial cost, yet it was able to save a huge amount of money and current situation is largely a speedbump rather than catastrophe. It seems the problem is not with the costs of production but rather maturity of the country that wields the power over the resource, whether it understands that a) they are largely dependant on it, b) it is not given that tomorrow the prices will be the same, c) it will run out some day and d) it is easy to spend money now but actually you have to be frugal to save them for when it runs out.
- nogabebop23 7y ago
  Noraway's costs are actually about middle of the road. Higher than middle east, N. Africa , S. America but much lower than N. America and the rest of Europe. This is impressive when you account for their environmental standards and relatively challenging locations. Their huge savings is the combination of saving but also very high cost of living & taxation. The state provides a lot but also places high taxes on everything. I live in Alberta where we have relatively low taxes and no oil savings. We've been boom/bust for our entire existence, but one huge difference - we've subsidized huge parts of the entire country during those good times. Those transfer payments add up to an incredible amount of money.
frank2 7y ago
The Saudi royal family can make a profit at $10/barrel for a few years, then they lose control of the country and the oil because they had to stop most of the bribes (social services, etc) they were paying the population to continue to go along with the regime. (The Russian government is in a similar situation to some extent.) But yeah, someone in Saudi will continue to sell the oil, maybe after a few months or a few years of chaos, even if they can only get $10/barrel.