Ian Walker <[email protected]> wrote:
> So oil will drop to 15% of its expected value from that 2014 high. > When the demand for a commodity rapidly drops by 85%, it does not follow that the value also falls by 85%. In most cases it will fall even more than that, as sellers become desperate to unload inventory. In some cases there is a "floor" to how far it can fall. I do not think it is possible for any country to extract oil for only $1 a barrel. It might as well be $0 (free), and no country can afford to give away oil for free for long. They cannot do that because costs them much more than $1 to extract it, plus they would have no income. Oil is 87% of Saudi Arabia's exports, and 70% of Russia's. > My understanding is that Saudi Arabia, Iran and Russia are all prepared to > drop oil to the $1 per barrel mark to kill off the majority of their > competitors. As I said, I think this would kill themselves off. I doubt that Saudi Arabia or Iran have a lot of foreign exchange saved up, and I know that Russia does not. They cannot go for years without income, while they spend billions extracting oil and giving it away for nothing. - Jed
