Quote:
Originally Posted by photon
Interesting, where are you getting those numbers of $50 and $30 a barrel?
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http://www.vivelecanada.ca/article.p...70526122247132 is an article that breaks down some of the oil money margins. It quotes an Oil Sands Discovery Centre number of $13.21 production costs per barrel of oil. I'm assuming a 10 - 15% target price safety margin for most exploration / recovery / infrastructure projects. i.e. If Oil is currently at $60/bbl, then prices could fall 6-9 dollars before much would change in terms of going forward with Oilfield projects. Hence the $50.00 price point. With production costs at $13.21, a $30.00 / bbl price still gives decent return BUT I would expect the industry would be getting pretty nervous about anything that might increase their costs and would, consequently, likely severely limit their activities and even mothball existing projects and rig activity. This would result in layoffs and changes in the investment climate and could trigger recession.
Given the spread between production costs and revenue per barrel, I would think I'm probably pessimistic about where the first blink level is set. For all I know, exploration and infrastructure may be tied to a target price much lower than $50/bbl. Needless to say, Oil at $60.00/bbl and above is virtually a license to print money and, IMO, there just ain't much of anything gonna stop this train. Interestingly, commentary on the loonie's strength against the greenback, in many sources, talks about how the dollar is being fueled by incredibly strong commodities....chief amongst which is oil. In terms of total economic impact, over time, think Saudi Arabia / Brunei. It makes the previous Oil booms seem like pop guns.