(11-29-2014, 01:06 AM)admin Wrote: The boardroom of Petrobras, already plagued by corruption scandals, must look like a warzone right now with the economics of their deep sea fields, requiring tens of billions of investment, wiped out..
My initial reaction to this extreme fallback in oil prices (and IOC's unfortunate parallel stock price reaction) was this is just another boom and bust and boom again that has always been part of this industry. But there are only so many oil price boom bust cycles one can go through before the senior discount at the movie theater ticket window brings an awareness of their finite number. To believe that the Saudis can produce oil for $10/bbl or less would tell me this could be a long, punishing downturn.
Here's a month old BBC article though that tells me something far different. The Saudi's cost of production...and the cost of production of every other OPEC nation... is in reality far greater. http://www.bbc.com/news/business-29643612 Here, the BBC writer states the Saudi production breakeven price is really $85/bbl. The revelation (to me at least ) is that a government oil company has social obligations with substantial budgetary realities. These national oil companies need a stable and high price for their oil in order that their governments maintain viability. Interesting here the equivalence of the words viability and profitability.
I'll rest assured tonight, enjoying the low price of today's gasoline knowing the ultimate cost to IOC of this short downturn will be negligilble. Such is the nature of THIS roller coaster ride.