marginal cost (2)

This is a continuation of discussion on marginal cost. I am going to focus on crude oil.

The marginal cost for crude oil is more complicated. There are about 4-5 million spare capacity in OPEC countries (middle east oil). The marginal cost is about $10-20/b. After that, the marginal cost jumps to $50-70/b for oil sand and deep sea oil. It is more difficult to forecast oil price because OPEC does interfere with free market. However, on a long run, if global demand grows 0-1%, then, oil price will be in current range (60-85). If Growth is around 2-3%, then in 3 years, we will exhaust all OPEC spare capacities and crude oil will be over 100. If electric car works and crude demand drops then, we will see oil trade in low 30s again.