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The cost of production and the price level required to balance the government's budget are two different things.
by kiriliponi 6y ago
The cost of production and the price level required to balance the government's budget are two different things.
- pa7x1 6y agoCorrect, to further explain the difference. The budget is drawn with a certain assumption of the price of oil, which nets them an expected profit per barrel with which they can balance income and expenses. If the price of oil is lower than that they may still make a profit per barrel but the budget is not balanced anymore and they will run deficits.
- koheripbal 6y agoThis is why higher oil prices seem to correlate with military adventures.