REVENUE = PRICE X QUANTITY
In perfect competition, price = marginal cost...
Oil producers are caught in the widely-ignored poverty trap - the less money you make the harder you work...something EconoDunces are going to learn the hard way when their text books are recycled into 4-ply ass wipe...In perfect competition, price = marginal cost...
Goldman just came out and stated the obvious, it's too late to cut production now...
"commodity analysts, led by Damien Courvalin and Jeffrey Currie, argued that not only is the oil cartel is highly unlikely to cut output but even if it did, the move would do little to push prices higher."
“While prices may rally initially upon announcement, we would expect this move to fade and the oil forward curve to remain in contango until inventories decline, just as was the case [during the Asian crisis] in 1998-1999,”
"the decision by OPEC in November 2014 and again in December 2015 to sustain production at high levels is about maximizing revenue over the medium term"
The real reason OPEC can't cut, is because they no longer control the market. At 40% market share, they can't even enforce quotas within OPEC, much less outside of OPEC.
They are caught up in the same sad yet ironic poverty trap that the majority of people on this planet are caught up in - increasing supply to compete with excess capacity just to SURVIVE. When costs are fixed there's no room to cut revenue...
As of Oct. 15, 2015
Speaking of Goldman Sachs
The stock is back in 2006, trading like it's 2008: No M&A, no IPOs, no Trading revenue, flattening yield curve...
