Outside the Middle East, the marginal cost of oil skyrockets, so do gas prices.
As the West is running out of cheap oil, we have to use very expensive drillings.
Outside the Middle East, the marginal cost of oil production is around $100 per barrel.
The marginal cost is simply the cost required to produce the next barrel of oil the moment the world needs it.
And if that next barrel costs $100 to find, produce and get to market, then the cost for all barrels of oil goes to $100.
posted on 09/24/2013 2:57:09 AM PDT
Thanks for the response. LIFO accounting. Very clear. Crude stocks not held long at all — must recapture current drilling costs as they are rising, not later.
posted on 09/24/2013 7:50:59 AM PDT
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