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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (23129)	9/3/2002 2:11:46 AM
From: Maurice Winn	Read Replies (1) \| Respond to of 74559

David, producing 'flat out' make sense if the net present values and places to put the money and all that economic stuff add up. Saudi Arabia has such huge amounts of oil that it's unlikely they'll ever produce it all, so they don't need to save much of it for a rainy day. Sure, they would be wise to keep a decade or two of stock there or something like that much, but it doesn't make economic sense to find oil at $10 a barrel when it can be produced from reserves at 50c a barrel. But making it too cheap would cause the USA to slap an import duty on it [calling it an environmental carbon tax] so they wouldn't really want to undercut the USA producers - that would be political suicide. Making it too cheap would also make technology life cycles out of synch with fuel supplies. Designing and building aircraft engines takes decades of life cycle activity, so oil is a long-cycle product. So I agree 'flat out' production, without some qualification, was over the top. The political exigencies are no doubt far more important than the economic realities, which means, as always, that political power holders impose very large economic costs on people. Mqurice