The drop in the oil price. I disagree with the analysis that is being put forward. I might be wrong and they might be right. They say that Saudi is not going to reduce supply in in order increase the price because this is a wack at Russia . But thing is, it is also a wack at the US and the fracking industry which has high production costs and at $80 a barrel the profits are slim, by their standards anyways. I think the following. Firstly how much profit are they really making at $80 a barrel? What are the real costs? And here is the thing. You can either sell 10 apples at $10.00 @ 50c production cost and keep supply down, or you can sell 100 apples at $10.00 with increase in production with less profit but more sales. And in the end more profit. Iran due to sanctions has been selling oil to China and India and Russia in exchange for commodities including gold. I strongly suspect that in order for Saudi to stay in this market with China their major customer, they have had to be competitive with prices coming from Iran. Hence the drop in price and we have no shortage of supply at all! Now take into account the population of both China and India. Any sane person would rather sell at lower cost to a couple of billion people than at high cost to a couple of hundred thousand in the west. Russia has made the same concessions in gas sales to China. Sell more at a lower cost to the east but more supply, than to the west at lower supply and higher cost. I once pointed this out to DSTV. That if they lowered their price they could get more customers and in the end make more money instead of high price and fewer customers. They did not see my point. Now anyone with half a brain has dumped them anyways, because the Internet is cheaper and there are a better and more wide ranging selection of shows, news report etc. China and India with their high populations would rather sell more of a product for less, than less of a product for more, because in the end the profit margins balance themselves out and the former is more lucrative in profits than the latter. I also rightly or wrongly believe that lower petrol prices are in fact going to free up and unblock a declining economy world wide that we have experienced since 2008. Lower petrol prices mean lower transport costs which means a cheaper flow of trade all round. Sort of like a laxative to a constipated economic system. But hey... what do I know? youtube/watch?v=d1CRJKLalTY
Posted on: Mon, 20 Oct 2014 18:16:34 +0000
Trending Topics
Recently Viewed Topics
© 2015