It’s Now Cheaper to Buy Oil Than Lemonade

It’s hard to ignore the massive decline in the price of a barrel of oil. The last few weeks have seen crude prices tumble back to their January lows of $44. The faint idea of black gold returning to a bull market after the 20% rally has turned from a dream into just a fantasy.

As the snow melts across the Midwest and East Coast and schools closed for Spring Break, the warm weather of summer seems to be quickly approaching. A popular summer pastime for kids is setting up a lemonade stand and hawking  their homemade beverages to passersby. At this rate it may be more profitable for kids to trade in their lemons for oil.

An 82.5 ounce container of Country Time Lemonade can make (according to the label) 34 quarters of lemonade, which is 136 cups. Doing a quick search at Walmart.com shows that this container costs $9.44, making each cup cost about $0.07, not including the cost of water and the cup itself. When selling cups full of the cold drink for $0.50 or even a $1.00 each, the margins likely appear to be pretty attractive for those future CEOs.

But if kids begin to look at other commodities to pitch to their customers, oil may be an attractive option. According to businessdictionary.com, there are 42 gallons of oil per barrel, which comes to 672 cups of oil. With oil trading at $44 per barrel, that comes to $0.06 a cup. Now of course there are other costs associated with procuring an actual barrel of oil. For the purposes of this article, we’ll stick to just the raw materials.

But looking at the simple math, the profit margin for a budding entrepreneur to sell cups of oil rather than lemonade this summer beats out the powder juice substitute by about 17%!

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

 

About Andrew Thrasher, CMT

Andrew Thrasher, CMT is a Portfolio Manager for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.

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