tag:blogger.com,1999:blog-5031801052696130392.post649290298728956071..comments2023-10-31T08:06:28.554-05:00Comments on Kaspar's Market Insights: Oil Price FloorMarket Seerhttp://www.blogger.com/profile/11426404712713948515noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-5031801052696130392.post-39921381577571669962008-06-16T15:23:00.000-05:002008-06-16T15:23:00.000-05:00My conclusion is that production cost is productio...My conclusion is that production cost is production cost, not fundamental value.<BR/><BR/>Yeah, 1000-2000 is not my short-term or even 5-year prediction for the price of oil. It's what I think oil is worth. There's a difference.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5031801052696130392.post-35369413597351812992008-06-16T15:03:00.000-05:002008-06-16T15:03:00.000-05:00A couple of problems with your analysis. Microsof...A couple of problems with your analysis. Microsoft is not producing a commodity product. As a result they can earn economic profits over the long term where as for commodity producers MC (marginal cost) must equal MR (marginal revenue).<BR/><BR/>Secondly lets take the low end of your price range. $1000. That would imply a $30 a gallon for unleaded gasoline. Even if you had a very efficient car that got 30 miles a gallon you would be paying a $1 per mile. That is completley impossible within the current economic structure. As a result demand would drastically fall off. In many cases it would not even make fiancial sense to go to work. <BR/><BR/>I must disagree with you. I have no idea where oil is going but I would be willing to wager a pretty penny it does not go to a $1000 a barrel in the next 5 years.Market Seerhttps://www.blogger.com/profile/11426404712713948515noreply@blogger.comtag:blogger.com,1999:blog-5031801052696130392.post-77698646190641782322008-06-16T14:09:00.000-05:002008-06-16T14:09:00.000-05:00We have had an exponential growth in population, w...We have had an exponential growth in population, we are shifting billions of poor to the middle class, and we have finite resources.<BR/><BR/>Despite the recent runup, I think oil is still shockingly cheap.<BR/><BR/>Short term, who knows where oil will go. Fundamentally, what is oil worth to you? I know people say, it only costs $x to produce... I say, who cares. It cost Microsoft nothing to press a disc, etc., so the production cost can't be the fundamental value of oil.<BR/><BR/>I suspect the fundamental value is in the 1000-2000 neighborhood. We shall see. If machines like cars become more efficient, then, actually, the fundamental value should go up since you're getting more work from the fuel. <BR/><BR/>If you were on Easter Island a few hundred years ago... how much was that last tree worth?<BR/><BR/>At any rate, the market is incredibly overpriced. The price of oil has not been factored into profits. It's so obvious.Anonymousnoreply@blogger.com