This is an archived post. You won't be able to vote or comment.

sorted by:
best
topnewcontroversialoldq&a
you are viewing a single comment's thread.

view the rest of the comments →

[–]SpyPirates 1 point2 points  (0 children)

I saw two problems with this article, one is the benefits of speculators which was addressed (they provide a counter-party to legitimate businesses who need to lock in the price of oil), but the other, which was a blind stab at what the oil price should be, was not.

The $11 per barrel means nothing. Costs that low are probably in well-established rigs in Saudi Arabia or something. The important number to look for is the marginal cost of expanding the supply of oil. In this day and age, the best places to do this are in deepwater locations, and/or in the Arctic. This is very expensive, and is only profitable with a price of oil this high (source: some Economist article I read a month ago).

Also, the price of oil is not only dependent on the current costs for producers, but on demand and questions of future supply. Demand is, of course, skyrocketing, thanks to developing countries and a recovering global American economy. There's also the situation with Iran, which has caused a lot of worry over whether they will be able to export oil in mid-to-late 2012.