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Politics : View from the Center and Left
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To: Lane3 who wrote (25215)7/26/2006 8:30:05 AM
From: thames_sider  Read Replies (3) of 541740
 
How, pray tell, does an increase in price increase the supply of oil in the ground?

That's reasonable, from a purely economic POV. If the ppb is $40, then oil that would cost $50/barrel to extract and process is not worth getting. If the ppb goes to$70 then suddenly it's economically viable (and counted in reserves).

It doesn't necessarily address the 'energy cost' of extraction, however - in other words, whether it requires more *energy* to extract and process the oil than that oil can provide; this occurs because different energy forms may be priced differently (and also there may be concealed 'sunk' costs of energy, for example in the manufacture of equipment or the construction of plant, where due to tax and other distortions the costs are concealed). But you may end up burning the equivalent of 110 barrels of oil for every 100 you extract, for example.

I'm not an expert so I can't tell for myself if this is correct...
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