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Politics : Formerly About Advanced Micro Devices
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To: neolib who wrote (228992)4/12/2005 7:57:42 PM
From: i-node  Read Replies (2) of 1572911
 
>> Why sink $1B into a large refinery, when the odds are that increased capacity will depress revenue?

My long crusty memory of "Theory of the Firm" seems to recall something about operating at the point where MC = MR. If demand for oil has increased so dramatically over the years it would seem to me that SOME additional refining capability would be essential to maintaining optimal operations, since presumably, marginal revenue could be increased. And it is inconceivable to me that an additional billion dollar expenditure wouldn't be justified.

I think the real problem is somewhere else. As you've indicated, it takes many years to fully depreciate a refinery -- is there doubt about demand 25 or 30 years from now?

I don't purport to know that much about the subject. But I find it bizarre that refineries operating at full capacity aren't being augmented with more capacity given the demand for the product.

BTW, I'm not opposed to ANY government involvement with developing alterantive fuels. I just think it isn't very realistic or desirable to lay the overwhelming burden on government -- the free markets are going to have to provide the encouragement for people to adopt it or it will certainly fail.
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