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Oil prices can remain high even in the face of inexhaustible supply
Feb 07: If the world has what is actually an inexhaustible supply of oil, what should the long-run equilibrium price?
8Since some see the trajectory of the oil market following that of coal and ‘oil could become the new coal’, then ‘oil prices could converge to the level of coal prices, about $15 per barrel in 2015 prices by the early 2040s’.
8To be more specific, the long-term equilibrium price should equate with the marginal cost of the lowest cost producer plus the return on capital in developing and producing these reserves.
8Are prices eventually go down, as they ideally should, to these levels?
8The answer is no.
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