News, Saudi king says oil should be $75 per barrel.

[evilnewbie]

This all reminds of deBeers... price is kept artificial by controlling how much and how fast it reaches the market... apparently the costs of producing it is really, REALLY low... makes one wonder how much it really costs to produce the stuff without market manipulations...

[Philip T]

Originally Posted by evilnewbie

This all reminds of deBeers... price is kept artificial by controlling how much and how fast it reaches the market... apparently the costs of producing it is really, REALLY low... makes one wonder how much it really costs to produce the stuff without market manipulations...

As with the diamonds -- there are differing costs by location, situation, and product.

Take Saudi, for example -- they rule world wide operation for lowest cost and high production. The Wal-Mart of Oil, as it were. They keep the cards in their hand very tight, so it is hard to get a peek, but common numbers say they can produce down into the single digits. (under $10 / barrel) However the high quality easy stuff is running down, and they have more heavy crude to put onto the market.

However Saudi cannot feed the world all the oil it would eat. Saudi only provides about 1/8 of any given year's consumption. Strangely enough the US is not that far behind them, but we eat SO MUCH we are in the hole before we start.

For a pretty, but slightly outdated table see >>>

http://en.wikipedia.org/wiki/List_of...oil_production

At the other extreme of cost of production are the Tar/Oil Sands in Canada. Rumored numbers there are over $60 to $80. So look for that to be winding down.

And then pick number points all the way along the number line in between according to location and situation, and there is your very fuzzy answer.

Key part is there is not a set magic price. Same as with buyers. And same as with buyers the folks who have tighter numbers drop off early, and folks who have the larger margin to live on keep producing and/or buying.

[baystater]

Originally Posted by John1960

CAIRO, Egypt - Saudi Arabia's king says the price of oil should be $75 a barrel, much higher than it is now, but his oil minister indicated Saturday that no measures will likely be taken until OPEC meets again next month.

Saudi Oil Minister Ali Naimi said that the Organization of Petroleum Exporting Countries will "do what needs to be done" to shore up falling oil prices when the cartel meets Dec. 17 in Algeria.

Saudi king says oil should be $75 per barrel (OneNewsNow.com) (http://www.onenewsnow.com/Headlines/Default.aspx?id=337390 - broken link)

Nice to want. They'll have to deal with devaluation and demand destruction just like everybody else.

[Oildog]

Originally Posted by evilnewbie

This all reminds of deBeers... price is kept artificial by controlling how much and how fast it reaches the market... apparently the costs of producing it is really, REALLY low... makes one wonder how much it really costs to produce the stuff without market manipulations...

There are many estimates on obtaining a barrel of oil, the key is finding the oil. Much cost in dry holes. IF you have a productive field I think the costs are under $20/bbl. That does not factor in the transport and cost to refine crude into saleable products. Granted some crudes are more difficult to obtain and process. The oil sands are more in the area of $50/bbl.

[jimboburnsy]

Originally Posted by evilnewbie

This all reminds of deBeers... price is kept artificial by controlling how much and how fast it reaches the market... apparently the costs of producing it is really, REALLY low... makes one wonder how much it really costs to produce the stuff without market manipulations...

Costs associated with producing a bbl of crude oil are so variable that I doubt one could compile a meaningful average. Further, you would be unable to calculate your costs precisely until such time as a producing reservoir has been completely depleted or has completely failed.

Make no mistake, any way you slice it producing oil and natural gas is an extremely capital intensive undertaking. A lot of revenue can be generated (especially at $150/bbl crude prices), but production costs are definitely not "really, REALLY low." If they were, we would have a lot more millionaires.