[lbo-talk] Production costs behind old prices

Andy F andy274 at gmail.com
Thu Mar 20 11:43:20 PDT 2008


On Thu, Mar 20, 2008 at 1:56 PM, Wojtek Sokolowski <swsokolowski at yahoo.com> wrote:


> [WS:] How can the investment increase from $5 to $15
> per barrel explain the price incerease fro $77 to $105
> per barrel? You need to take other factors as well,
> such as demand increase, or the fall of the dollar.
> $35 per barrel in 2000 USD equals about 40 Euro, but
> $105 per barrel in 2008 USD equals only about 70 Euro,
> so from that point of view, the oil price is not up
> that much as the USD-denominated prices seem to
> suggest - it is the USD (and currencies of oil
> producing countries pegged to it) that is weaker.

The point isn't that the production cost accounts for all of the increase (notwithstanding my poorly worded and mis-typed subject line), it's that oil is getting harder to extract. The article notes that that $15 is an average that includes older, easier sources, and that the newer sources that are supposedly going to replace the oil fields you've heard of cost more and require more energy to produce.

This is completely in line with the peakista narrative.

-- Andy



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