Our interview with Matthew Simmons yesterday was very illuminating. Matthew has a way of showing you ways of looking at a problem that you otherwise would have never considered.
Take, for instance, the price of oil.
Matthew believes, flat out, oil is insanely cheap.
Now, dear reader, I know that with oil trading for $60 a barrel, up from $25 a barrel just a few years ago, the word cheap doesn’t come to mind when talking about oil.
But Matthew convinced me that oil is not only cheap, but at $200 a barrel it would still be cheap.
Here’s how he proved it to me.
Take a barrel of oil, and divide it into gallons. There are 42 gallons of oil in every barrel. Now divide it further into pints. There are 8 pints in every gallon.
So, 42 x 8 = 336.
There are 336 pints of oil in every barrel.
Now, take the price of oil and divide that by the number of pints.
60 ÷ 336 = .1785.
A pint of oil costs .18¢.
Go to your local 7-11 or Quick Mart and see if you can buy a pint of anything for 18 cents.
If the price of oil shot up to $200 a barrel, each pint would costs 60 cents.
I don’t know about you, but I haven’t paid 60 cents for a pint of beer since I was about 20 years old… and even then, the beer was National Bohemian.
– Brian Hicks