In 2006 average production cost per barrel crude oil was:
- USD 25.66/barrel in Africa
- USD 15.62/barrel in US(combine onshore& offshore)
- Europe USD 22.79/barrel
- Middle East USD 5.26/barrel
The total world wide average is USD 17.23/barrel
If production cost escalate by 10% pa (a figure plug from the sky) the world wide cost of crude oil production will be in a ball park figure of USD 24.12/barrel now in the year 2011.
So simple maths, crude oil at USD 122.34/barrel yesterday close. Brings about a clean gross profit before storage and transport cost - USD 98.22/barrel.
So if these pricing is incorrect or out by 50%, my question is where has these profits flow to? Has it being a situation whereby countries such as Saudi Arabia are unable to spend or invest their windfall quickly?
A new global inflationary rise will hit markets and central banks will be hard press and have to intervene to slow down a surge in inflation. Again we need to be mindful and don't allow inflation to eat into our fixed income investments, thus giving us a negative real return.
Finance ministers and central bank governors has their hands full now, while they are at it, we all need to be wise while we manage inflation.
Till then.
TJ
No comments:
Post a Comment