SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The coming US dollar crisis
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: axial who wrote (21831)8/6/2009 9:22:12 AM
From: gregor_us  Read Replies (2) of 71479
 
Here is something helpful. There is the average cost of supply(globally). And then there's the incremental cost of supply(globally).

At 71 NYMEX/72 Brent, I do think we are well above the average cost of supply--which is probably somewhere around 30-40 a barrel. What this means is that at current prices, the global oil industry seen as a single unit makes money. No question.

But 71/72 is very likely not above the average cost of incremental supply--which is best defined as the price needed to bring on the *net* new barrel, globally. Not merely the new barrel. The *net* new barrel which actually adds to world supply after depletion has been counted.

Let me just go back to that 30-40 average cost of supply for a moment: that is the huge change that occurred this decade, that gives us the oil price we have today. The price area that had once been thought as unsustainable (40) is now not far off from the average cost price of oil globally. Again, I think that level is currently fluctuating between 30 and 40 and with recent cost deflation in materials and labor, probably this level is more towards the 30 end of that range. However, again, this is really high.

What's even higher of course is that incremental level. Where do I put that now? Probably at 80 minimum. Part of the reason is as follows: it's really, really hard to create a *net* new barrel now in the current environment of steep 6.5% + average production decline (from depletion).

HTH.

G
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News