Profile picture
David Reaboi @davereaboi
, 6 tweets, 2 min read Read on Twitter
I see a lot of folks aren’t sure what to make of the wonderful news about record US oil production—some seem to think it means we can be energy independent and no longer need OPEC countries like Saudi Arabia as allies. Let me explain very briefly why that’s not the case. (1)
This is an old chart, but it still works for purposes of making this point. It’s the cost of production of a barrel of oil in different countries. Notice the super low cost of production for the nations at the bottom.
That number is the cost or break-even price for each of these countries. It doesn’t have to do with supply as much as it has to do with the cost of getting it out of the ground—countries like Kuwait and KSA have very easy access to large quantities of oil; others do not.
What it means for a country like Russia, then, is that the price per barrel of oil needed to be >$120 for it to make sense to access from the Arctic. If the price of oil is <$120, they’re losing money if they’re producting—so they don’t.
If the price of oil is set by the number of barrels being produced, naturally, the countries with the lowest production costs are able to set the price—it costs them peanuts per barrel, and they can control the spigot of how much is in the marketplace at any given time.
Often, the decision to produce more or cut back is a political one, tempered by economic realities. For example, Reagan deftly enlisted the help of the Saudis to produce more oil and lower prices—that made the price fall below USSR’s production costs. It was a death-blow to them.
Missing some Tweet in this thread?
You can try to force a refresh.

Like this thread? Get email updates or save it to PDF!

Subscribe to David Reaboi
Profile picture

Get real-time email alerts when new unrolls are available from this author!

This content may be removed anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just three indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member and get exclusive features!

Premium member ($30.00/year)

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!