Bruce Nunnally Posted October 17, 2008 Report Share Posted October 17, 2008 NYT The drop in prices has already created problems for oil producers. Iran and Venezuela both need oil prices at $95 a barrel to balance their national budgets, Russia needs $70 and Saudi Arabia needs $55 a barrel, according to Deutsche Bank estimates. Algeria’s oil minister, Chakib Khelil, said on Thursday that the “ideal” price for crude oil was $70 to $90 a barrel. Certainly a very different story than when they were telling us that there was just not much oil left: “We pretty much know where supplies are going to come from in future years, but today the biggest uncertainty is demand,” said Christophe de Margerie, chief executive of Total, the French oil company. Bruce 2023 Cadillac CT4-V Blackwing Follow me on: Twitter Instagram Youtube Link to comment Share on other sites More sharing options...
WarrenJ Posted October 17, 2008 Report Share Posted October 17, 2008 NYT The drop in prices has already created problems for oil producers. Iran and Venezuela both need oil prices at $95 a barrel to balance their national budgets, Russia needs $70 and Saudi Arabia needs $55 a barrel, according to Deutsche Bank estimates. Algeria’s oil minister, Chakib Khelil, said on Thursday that the “ideal” price for crude oil was $70 to $90 a barrel. I read several months ago that world oil suppliers, in general, require close to $70/bbl to break even. I'd like a second opinion on that, however. Venezuela "sells" just over half of its oil at below-market prices to its politically like-minded friends. The remainder it sells to the U.S. for cash. That might explain its requirement for a higher sale price. Additionally, Venezuelan oil production is declining. Some say it's a product of their political system. Nevertheless, it adds to their need for a higher sale price. Iran is in a similar situation: soaring inflation and joblessness coupled with declining production help to explain their predicament. Their political situation, as well, leaves room for worry. The Saudis can just about stick a straw in the sand and suck up oil (although it's possible they're fibbing about their reserves). Their recovery costs are among the lowest in the world. I'm left to wonder if a large part of their $55 expectation involves other considerations. The Russians? No truth will come to you from there. There are extraordinary variables in the oil producing countries. It doesn't bode well . . . . Regards, Warren EDIT: The Algerians? Oops, I left them out. Strangely, it seems they have a reasonable price expectation. That's curious. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises Link to comment Share on other sites More sharing options...
Bruce Nunnally Posted October 17, 2008 Author Report Share Posted October 17, 2008 I believe that the numbers in the article are not recovery cost, but cost that the various countries need to make their budgets. My understanding of actual recovery costs is around US$16/barrel. That at least is a figure I was told that if oil is above that, the oil companies make money. Bruce 2023 Cadillac CT4-V Blackwing Follow me on: Twitter Instagram Youtube Link to comment Share on other sites More sharing options...
WarrenJ Posted October 17, 2008 Report Share Posted October 17, 2008 I believe that the numbers in the article are not recovery cost, but cost that the various countries need to make their budgets. Yes, that's what I meant about the Saudis. Only a few years ago their recovery cost was not much more than $6/bbl. Today you need to add debt, corruption and "external expenditures" to their overhead. There remains the possibility they are overstating their reserves. Regards, Warren There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises Link to comment Share on other sites More sharing options...
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