Oily OPEC

oil rigOPEC’s decision to push oil prices down assumes that lower prices reduce the supply of oil. However, unlike most natural resources, the marginal cost of producing another barrel of oil is low, once a well is drilled. Thus, oil pumping does not generally respond to price shocks. However, drilling new wells does. Thus, the future supply of US oil will depend almost entirely on how fast existing fracked wells deplete.

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