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View Diary: Exxon CEO: Oil Price is 9x Higher than Production Cost (75 comments)

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  •  what is the price of a barrel of oil? (3+ / 0-)
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    elwior, Subterranean, semiot

    First, ya gotta love the oil co execs. Yes they are happy to point to futures traders as "the culprit" for the current high prices. They will point to anyone, even gas station owners, as long as it isn't them.

    Second, what is the true price of a barrel of oil? For certain there are mature onshore fields, whose infrastructure has been paid for many times over, whose current costs are low. But what about deep sea oil that requires major investment? Is BP's cleanup cost rolled into the stated cost per barrel? What about tar sands "oil" that requires processing to create something like crude?

    Third, it's not the average price but the marginal price that matters. Right now the globe produces ~73 million barrels of oil/day - that's just crude, not tar sands oil or ethanol or the other stuff that gets rolled into "total liquids."

    It may be that 60 million of that is <$20/barrel to produce. But we need 73 million. So the cost that matters is the cost of that very last barrel. I have read on the oil drum that some think the marginal barrel cost is about $80/barrel.

    Fourth, supply and demand can definitely lift the price above that marginal barrel price.

    Finally, I have a question about your data. You state:

    Despite the fact that oil consumption decreased by 1.1 Mbd over the last year, news outlets have suggested otherwise by stating that there has been a "drawdown of inventories".

    What is the source of that drop in oil consumption? Is is global or US? I saw a number like on the BP site which was global 2009 v. global 2008.

    However, prices were LOW in 2009, relatively. Use dropped in the recession that began in 2008 (in part due to the price spike in 2008). What matters in our current spike is use NOW and production NOW. I don't know those numbers, but I do know that Libyan oil's disappearance was something.

    An ambulance can only go so fast - Neil Young

    by mightymouse on Sun May 22, 2011 at 09:04:12 PM PDT

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