In theory, lower prices should attract more customers and create more gross profit.
Because people buy more when prices are low.
Yes, that’s true but that whole ‘escape velocity’ thing ... is that measurable? How low would prices have to go to produce enough profit to overcome the losses?
It doesn’t work that way with oil.
If it cost more to produce a barrel than you get out of it you simply stop producing until the price goes up.
It’s in the ground so it’s not going anywhere.
You can pay a shut in fee to the mineral owners to keep the lease or just put the well on a timer and hold the lease through production.
A single barrel a month is considered production.
Producers will attempt to create a shortage to drive the price up but until they do millions of people are out of work and mineral owners don’t get royalty checks.
“In theory, lower prices should attract more customers and create more gross profit. Because people buy more when prices are low.”
It depends on the margin. If you lose 50 cents on every gallon, more sales means larger losses.
That’s how it works.