The 800% Profit of oil, getting screwed in more ways then one!

The 800% Profit of oil, getting screwed in more ways then one!

By Steve Austin

$131 per barrel: the line was finally crossed on May 21st 2008. What does this imply for profits of oil producing nations? In order to run some numbers

we have to consider a key measure called the break-even price which is the amount of money it takes to extract 1 barrel of oil.

The break-even price is the first thing oil companies establish in order to determine if drilling a new well makes financial sense. From the break even price, profitability can easily be determined with the following formula:

Profitability = (Price of Oil - Break Even Price) / Break Even Price

For example with oil at $100 and a break even price of $50, profitability is 100%. But with oil at $60 and the same break even price, profitability drops to 20%

The following table provided by the Bank of Kuwait gathers current reported break-even prices of major oil producing nations as of 5/19/2008:

Based on the formula, profitability of these countries' oil operations are in order:

This level of profitability explains the recent $7.5 billion placement in troubled Citibank from the Abu Dhabi Investment Authority, the $1.8 billion investment in UBS by a strategic Middle East investor and the 20 percent acquisition of the London Stock Exchange by the tiny nation of Qatar.

-------------------------------------------------------------------------------------------

This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader

This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com