It is no secret that one of the things holding what remains of the economy together is low oil prices. That’s more than somewhat recursive, of course, since its the anticipated slack demand brought on by global recession (or fear thereof) that’s depressing oil prices. But Western salvation is Mideast disaster. As OPEC members, many already well under their petrol-augmented budget lines owing to subsidy stuffed fiscal policy, begin to panic all sorts of strange tactics emerge. Cooperation with Russia, for instance. 2 million barrel per day cuts. Earnest promises that there will be “no cheating this time” and economics lessons from oil ministers who enjoy touting phrases like “the consumer appreciates a robust market for oil.” All of this, of course, masks something approaching panic. This should concern us. What does a panicked OPEC do if this cut fails (as is probably quite likely)?
OPEC ready for deepest oil cut to rescue prices [Reuters]
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the “ideal” price per barrel for an integrated oil company (i.e. one that does it all .. drills, explores, refines, sells “upstream and downstream”, etc) — is abt $67.50 bbl to maximzes revenues overall.
@1: First, don’t promote your $67.50 figure as if you have a clue what you’re talking about. Why would you hedge yourself (saying “about”) then bring your number out to two decimal places? Companies have a particular structure in place with certain assumptions, but yet seem to consistently beat everyone’s estimates for how quickly they can adapt to new environments and still pull a profit. $67.50 could just as easily be $60 or $55 in a year or two.
Second, LTCM pegged their odds of losing all their capital in a year at 10^24-to-1 against. That seems pretty accurate, and developed by smarter guys than you, and look where it got them. Go stuff your assumptions up your black gold hole.
if that doesnt work a panicked OPEC has russia help iran build a nuke, hoping someone bombs the shit out of them, thusly driving up oil.
haha 2, you’re quite angry for 10am, no?
its easier to see what price maximizes profits for a producer than to do risk analysis #2 .. ive heard figures around $65 being ‘ideal’ for oil cos
*US Oil co’s not OPEC!
I need cheap oil so that when my house gets foreclosed on I can live in my car!
my car gets approximately 19.23198574 mpg.
thats some shite mpg
@1/2/5
The simple profit maximization equation is economics is definately not adequate to deal with the intricacies of oil. Those companies were making a helluva more when oil was at $140 than at $70 in the short run because demand is very inelastic. You need to have highly elastic deman and ample substitutes for the formula to work.
Jeez yeah, Ummm, Dr. Dre. he’s about as fresh as Elvis in the 90′s.
Toole
@2 easy there cowboy! did you get your bonus number today? i will likely be the same way friday so no worries. aside from that approximtely $60 – $70 is ideal as anything greater than that is usually lost to the nocs (national oil companys) based on the revenue sharing agreements. lets get these prices back up north of 60 so i can justify my existance as an oil and gas banker. if not soup line for me…..the boom and bust of houston, fun stuff!