EconomPic got an anonymous post that I've been meaning to reply to:
Anyone see this yet? China loans $25B to Russia for ~2.2B barrels of oil...that's less than $12 per barrel. Peak oil? Hmmmmm....Further details of the transaction per Reuters:
That last part is key... over 20 years. This is the equivalent of giving Russia a 20 year loan and expecting it to be paid back over the next 20 years. Solving for the payment size given a $25 billion present value, 365 * 20 periods, and whatever interest rate you want to assume you get the following:
Transneft and China National Petroleum Company (CNPC) agreed in October to build a spur to carry 15 million tonnes a year, or 300,000 barrels per day, between the countries' trunk pipelines.
Over 20 years, this adds up to 300 million tonnes, worth almost $90 billion at current prices, and enough to meet around four percent of China's current oil needs.
Assuming a 10-12% interest rate (that of the Russian sovereign debt) over the 20 year "investment", then the price is more like $25-$30 per barrel. Looks like it could be a nice deal, but $12 it isn't.