kublikhan wrote:meemoe_uk wrote:You've calculated the gross sales income of the oil industry. That's not the same as the expenses. If it were, the heads of the oil industry would be as poor as street cleaners as there would be no profit margin.
I did not make up that formula, I took it from the definition of oil expense indicator. That is the cost oil consumers have to pay to get the oil.
I know.
You seem a problem distinguishing between cost to the consumer and cost of extraction.
1st you refer to cost of extraction...
>But if we have to spend shit loads of money/energy on getting that oil out,But when i address this you switch to cost to the consumer
That is the cost oil consumers have to pay to get the oil.Don't confuse yourself.
meemoe_uk wrote:it wouldn't be hard to find a better job than kicking a ball round some grass for £1million. So you wouldn't be able to kick a ball for £1m a year anymore? How terrible. At high oil prices, jobs would gravitate away from waste and towards energy sources.
Ironic. For your example of jobs that waste oil, you picked the profession that probably has one of the lowest oil uses in the world. Sorry to break it to you, but even in Roman times they had coliseums with people throwing a ball around to entertain the masses. If you had hopes high oil prices would kill this job, I would not get my hopes up if I were you.
Sorry to break it to you, but you are flipping back and forth between cost to the consumer and cost of extraction to suit you being right every time.
This is what happens when I follow you up on your flip to 'cost to the consumer' ( for football its roughly £1m per player ).
Yep you've flipped back to cost of getting oil out the ground per football match \ player.
2ndly, if you do want to flip back to cost of oil extraction to suit yourself, you've just failed again. The example of sport as a waste of oil has plenty of examples; moter racing being a pretty obvious one.
Seems you aren't trying to understand anything. Just a game of flipping subject and ignoring obvious examples.
kublikan wrote:meemoe_uk wrote:Not really. Money is fiat. The amount in circulation can rise and fall to match the needs of the economy. Conversely, the cost of the economy can rise and fall to match the amount of money.
Sure printing money could radically alter the dollar cost of a barrel of oil. But I am saying in today's dollars, it will never get that high. Spitting out a nonsense $16,000 a barrel figure without qualify what dollars you are talking about really is not saying much. A loaf of bread could go to $16,000 with rampant money printing. But at today's dollar value, it is impossible for oil to go to $16,000 a barrel. That would result in an oil bill that is an order of magnitude larger than the entire GDP of the world.
I agree. The world will effectively never run out of cheap energy, therefore any energy source will never attain its potential highest price.
2005AD dollars if that helps you so much. What did you think, 1812AD dollars?
And no it wouldn't result in such a large oil bill, even if money kept the same value. People would buy less of it, it would be treated very carefully.
meemoe_uk wrote:kublikhan wrote:The most expensive barrel of oil sets the price.
Not really. The cheapest price is the most competitive. If your well can only produce expensive oil you aren't going to hack it in a cheap oil market.
I don't think you understand how commodity pricing works. It's true enough that if the price of oil falls below the marginal cost, the high cost producer cannot compete and has to stop production if prices stay below the marginal cost for an extended period. But what you seem to be missing is the guy producing oil for cheap is not going to sell his oil for his cost if the guy next to him is selling it for 10x as much. He sets his oil at the marginal cost of the highest selling oil, even if his oil is much cheaper to produce.
...during a bull market and he therefore makes more profit than the expensively extracted oil well owner. During a bear market the price of commodities go to their lower values, and the expensive oil well owner can't compete, while the cheap guy can lower his prices and still make profit. Over time the cheap oil guy wins.
You don't seem to grasp this so I don't think you understand how commodity pricing works.
...Costs are rising because much of the extra oil added to world supply has come from more technically challenging areas such as deep water or the Arctic, Bernstein said. This has led to "a combination of higher material costs and reduced productivity per well," it said.
Dont' get too hung up on margerine costs, you don't need them to see whats going on. In this case Bernstein is blowing smoke in your face. While its true to says there's cash going into technically challenging extraction, its more correct to say the cause of costs rising is because the Anglo Americans and allies are funding oil developement and setting market prices to do the same.
kublikan wrote:meemoe_uk wrote:At the mo, TPTB have set the market value of $100pb. This is to promote investment in the oil industry. It's not a true marker of the extraction cost per barrel. ( i.e. it's not costing say $80 to extract oil so the industry can get $20 profit pb ).
So we have all these alternative methods of oil extraction being considered as profitable at $100 market price.
Oil prices at set on marginal costs. IE, oil prices are set by how much it costs to produce one
new barrel of oil. If the market refuses to pay this cost, supply destruction occurs and that barrel of production oil is shut in. It's basic economics. You don't have to conjure up scenarios of cackling oil execs controlling the price of oil. If oil is priced at a cost below a producer's marginal cost, production is shut down for that producer.
If you don't consider the strategy and role of oil execs then your model will have less ability to predict the future. You can always cook up excuses when stuff happens, like due to some marginal cost or some other economic jargon going awol.
Kublikan wrote:meemoe_uk wrote:The truth is though, the big players are all in the middle east oil bonanza setting up cheap oil extraction from conventional sources. When they've finished setting up in a few years, they won't need anymore extra support from inflated market prices. It's possible the market price will be dropped on purpose to cull the competition from all the new oil companys that have prospered in the high oil prices, and the market for alternative oil sources will either be bought out and subsidized or die off.
Of course, the media won't tell it like it is, it will report it as ' demand destruction '.
No. Big oil is turning away from cheap fields in the middle east and africa and turning instead to expensive fields in the OECD. At first this seems counter-intuitive. Why would you develop and expensive field if a cheap field is available? The truth is there are other costs associated with these "cheap" fields. Political risks like nationalization. Security risks like civil wars and pipelines getting blow up. Etc. Oil execs concluded it was more profitable to develop expensive oil than to deal with these risks. I tabulated all of the new oil oil coming online between 2003 and 2018(oil megaprojects database). More oil is coming online from non-OPEC sources than from OPEC sources.
Actually thats reminds me of an interesting variation on to my current favoured outlook.
The Anglo americans have been smashing up middle east countries, and I thought it was so the anglo american oil companies could then move in and steal the oil, like in Iraq. The alternative is they smash up these countries, and instead of moving in and taking the oil, they just ensure these countries are not able to grow strong enough to develope their own oil sources. Meanwhile the Anglo americans develope more expensive oil back home. This way when the expensively developed domestic oil hits the market, it doesn't have to compete with cheap oil from foreign oil companies outside the control of the anglo american kartel.
So good point.
kublikan wrote:meemoe_uk wrote:As usual we've had an interesting diversion away from a new record of oil production. Perhaps we should call this thread the ' talk about anything except oil production record thread! '.
Sorry for going off topic, but I could not resist correcting a few points you made. A few of your statements were incorrect and I prefer our posts here originate from accurate information, even if we disagree on how best to interpret that information.
Well thanks for bringing something interesting to the discussion, even if the rest of it wasn't insightful. If you've got any more info to support the idea that oil majors are staying away from many Middle east countries and instead focusing on domestic expensive oil, and keeping these ME countries bombed and broken, pass me the links, i will read them.
Then you can be in that very exclusive club that every peaker, doomer and AGWer on the site want to be in - the - ' I made meemoe rethink his view on world oil geo economics ' club !