alt Hacker NewsThere are businesses that are highly profitable even in a commodity market. Profits go to zero on the marginal supplier in a perfect market. Any supplier who has a lower cost base than the marginal supplier is profitable.
The canonical example is oil. It costs about $3 to pull a barrel of oil from the ground and pipe it to port in the best oil fields of Saudi Arabia. OTOH, Canadian tar sands cost $50 to pull out of the ground and another $10+ to get to port. During normal times the natural price of oil is ~$60.
Replies
conorcleary • yesterday at 5:00 PM
Those numbers have gotta be old-distro prices
Okay but think this through all the way. Either the marginal suppliers are the vast majority of the supply with the highly profitable ones being low volume or else the marginal suppliers go out of business, the price crashes, and the previously profitable suppliers are the new marginal ones. Rather than a spherical horse in a vacuum the reality we currently enjoy is dependent on various barriers to entry (ie inefficiencies).