OPEC vs. U.S.: Who will blink first on oil?

CNN Money ^ | January 13, 2015 | Travis Hoium

[gogeo]

This assumes Margins is constant. Usually, margins are compressed when prices are falling.

Constancy of margin is irrelevant. Margin X volume always equals profit.

If one does the math, that means that it makes no sense, as some are alleging, that SA is dropping the price to make more money. If the price of oil drops by half, it would be necessary to at least double volume of oil pumped. That's not happening.

[gogeo]

sales is a function of volume

Yes, as in volume X price=sales.

And unit price-cost=margin.

It's all math.

[econjack]

Actually, we are agreeing. All I was saying is that what they are doing is not consistent with trying to maximize profits, so there must be some other reasons for their actions and I was speculating that the reasons are political more than economic.

[gogeo]

I think there's a political element. But doing what they are doing is consistent with maximizing their long term return on their reserves.

I'm not a greenie by any means but I believe that oil will be relegated as old technology for energy within 50 years. I suspect SA thinks so too. Once the world uses another primary energy source their reserves are worth little.

They have to pump while there's demand.

[econjack]

You’re probably right...