On Dec 20, 12:31 pm, M V Bhaskar <[email protected]> wrote:
> The Developed countries opposition to investment in finding
> alternatives to Petroleum and Coal is quite difficult to understand.
>
> US Gasoline consumption is about 9 million barrels per day.
> Current price is $ 70 per barrel, so the annual cost is 9 * 365 * 70 =
> $ 230 Billion.
>
> We have already seen price of $ 140 per barrel last year.
> If price goes up to $ 140 again in future the burden on US consumers
> will be about $ 230 Billion per annum.
> So how much should US invest to find alternatives to Gasoline?
The problem is that if anyone spends billions developing an
alternative that is profitable at $40/barrel equivalent (say) then the
oil companies can just pump more oil to send the price below that
level for a year or two, and bankrupt the competitor. Since oil it
highly price inelastic this is a very plausible scenario.
(Of course, another factor is the risk of spending billions and ending
up not getting anything that is profitable at less than $200/barrel
equivalent.)
James
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