fredethomas
Moderator Emeritus
A Peter Huber and Mark Mills of The Wall Street Journal wrote of a real "paradox" about crude prices. It is in direct contrast to the well known "Supply and Demand" theroy of pricing. Their article, or a summary of it appears in February 11th edition of The Week. It goes like this:
1. The cost to pump crude from Saudi oil fields it $5 a barrel.
2. The cost to extract from the sands of Alberta, Canada is $15 a barrel.
3. The clay of the Orinoco basin in Venezula and the tar sands of Athabasce, Alberta contain 3.5 TRILLION barrels of oil.
4. This is about one centuries worth.
Now the paradox. "The price of oil remains high only because the cost of oil remains LOW." Seems that OPEC could bankrupt any attempt by companies to recover and refine those oil stocks. By a wave of the hand "a second cousin of Osama bin Laden can knock off $20 per barrel" making the development of recovery infrastructures risky. These two writers note that "one company will eventually take the risk and leave the world with a plentiful supply of oil. Then prices will sink to a level that reflects the worlds vast supply."
1. The cost to pump crude from Saudi oil fields it $5 a barrel.
2. The cost to extract from the sands of Alberta, Canada is $15 a barrel.
3. The clay of the Orinoco basin in Venezula and the tar sands of Athabasce, Alberta contain 3.5 TRILLION barrels of oil.
4. This is about one centuries worth.
Now the paradox. "The price of oil remains high only because the cost of oil remains LOW." Seems that OPEC could bankrupt any attempt by companies to recover and refine those oil stocks. By a wave of the hand "a second cousin of Osama bin Laden can knock off $20 per barrel" making the development of recovery infrastructures risky. These two writers note that "one company will eventually take the risk and leave the world with a plentiful supply of oil. Then prices will sink to a level that reflects the worlds vast supply."