How would this change affect the cost of production

Reference no: EM133505595

Question: Approximately 19 million barrels of petroleum are used per day in the United States. Of those, roughly 8 million barrels are imported and the rest come from U.S. resources.

Petroleum source	Production cost per barrel (Average)
United States	$65.00
Canada	$91.00
Saudi Arabia	$3.00
Venezuela	$20.00
Iraq	$6.00
Algal biofuel	$273.00

Assume that 40% of the imported petroleum is from Canada; 49% is from OPEC and Persian Gulf countries, with production costs similar to Saudi Arabia; and 11% is split evenly between Venezuela and Iraq.

Using the data for cost per barrel from each source, calculate the production cost to meet current U.S. daily use. Do not round your calculations.

Suppose the United States replaces half of its current oil imports from OPEC and Persian Gulf countries with domestically produced algal biofuel. How would this change affect the cost of production to meet the U.S. daily need?

Reference no: EM133505595

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