Today, understanding the evolution of the price of a barrel of oil it is better to focus on the marginal cost at production cost.
Rather than ask you a brutally abstract formula to calculate the marginal cost we will proceed with a simplified example to the fullest.
Imagine a world with 10 oil wells that can produce 1,000 barrels per day.
There are nine oil wells that produce at a cost of $ 25 and $ 100 in the 10th.
- If the request is 9 000 barrels per day, the nine wells with a production cost of $ 25 are used.
The daily bill for 9 000 barrels a day is 225 000 dollars (9 000 barrels* $25)
-If the application is brought to 9,001 barrels a day, prices will rise to $ 100 and the 10th will be well used.
The daily bill for 9 001 barrels days will be 900 100 $ (9 001 barrels*$ 100).
With this new barrel of oil, the production cost increases from 25$ to 25,001 dollars and the marginal price of a barrel of additional 675 100 $ (9 00 100-225 000 $ = 675 100 $).
In this example an increase in demand of 0.01% increases the price of 400%, without manipulation, without speculation and without "global conspiracy" of oil companies.
With rising oil demand came gradually in the area of the "tenth oil wells" since 1998. This "tenth oil wells" are the oil sands of Alberta, the ultra-deep offshore Gulf of Mexico, Gulf of Guinea, Brazil, oil shale in Texas, the extra-heavy oil in Venezuela, the Brazil biofuels, liquefied coal from South Africa...