The Cruel Math of the Marginal Barrel
- Why oil price vulnerability is growing
- Why the marginal cost of oil is rising higher at an accelerating rate
- Why the marginal cost of oil for non-OPEC regions is now above $90
- The hard math explaining why an increase an output from OPEC will no longer reduce the world price for oil
- The new rules that will govern the price of oil from here
- The alarming growing risk of large-scale war for oil
Part I: OPEC Has Lost the Power to Lower the Price of Oil
Part II: The Cruel Math of the Marginal Barrel
An unpleasant megatrend that has affected global oil production the past decade has been the quickly escalating cost of production. However, prices have finally risen high enough to stabilize declines in regions like North America.
This actually makes for a new and emerging vulnerability: the risk that prices fall at some point through levels that remove the new oil supply.
Given that world oil production has been trapped below 74 mbpd since 2005, and that the cost of the marginal barrel keeps rising, this vulnerability is growing.