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Politics : Formerly About Advanced Micro Devices
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To: TigerPaw who wrote (415194)9/8/2008 12:53:25 PM
From: TimF  Read Replies (2) of 1576705
 
If the price of oil goes up slower over time than a reasonable discount rate, than it makes sense to drill now rather than later. Money now is worth more than the same amount of money (even in real terms and esp. nominal dollars) later.

OTOH if the price is going to go up faster than any realistic and reasonable discount rate it can make sense to leave oil in the ground.

The oil price over time has gone up much slower than what most people would consider a reasonable discount rate. Oil in 1950 was about $2.50/barrel or about $22.80 today. So Oil has gone up about 5 times in real terms in 58 years. If your discount rate is even 3%, then it would have made sense to extract the oil then rather than wait until now.
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