Friday, May 3, 2013

On POS Fuel Costs and the Price of Ice

As I discussed earlier, with Odyssey the price of ice is probably going up.  My guess is way up, although I have not estimated how much yet.  Without committing to a number, let's look at how much the price of POS fuel depends on ice.  I am using Amarr Fuel Blocks as an example, because I run Amarr towers.  However the same principle applies to all fuel types.

Currently at Jita, Amarr fuel blocks sell for between 14500 - 15300.  (That range is the highest buy order to the lowest sell order.)  For the purposes of our computation, I am going to take the low sell order as "the" price for all goods, so, 15300 isk.

How much of that value is due to ice, and how much comes from other stuff?  A fuel block is made from the following PI incredients: Coolant, Enriched Uranium, Mechanical Parts, Oxygen, Robotics.  In addition, the ice ingredients used are: Heavy Water, Liquid Ozone, and a kind of isotope.  For Amarr the isotope is Helium.  So, the goog tells me that one Goren Styne has already made a spreadsheet for POS fuel.  On the second page we find the info I want...
Amarr Fuel Block production costs, using numbers from today

(Note the razor-thin profit margin.  This is an awful business to be in.)  So now we experiment.  What happens if all ice products leap in price by a factor of 10?  You get this:
Here's what happens if ice products are 10x as costly
Ouch!  Price has just jumped by a factor of 6.4!  So we see that fuel costs are quite sensitive to ice costs.

What can we predict?  Well, I had not previously realized just how sensitive fuel prices are to ice prices.  (It's actually easy to see in the first spreadsheet, but you have to actually look at the numbers.)  It already costs a significant amount to run a POS.  If fuel prices sextupled, there are going to be a lot of POSes shuttered because they are no longer cost-effective.  So I do not expect anything like a 10x increase in fuel prices; that would be enough to reduce demand by 20% or more.

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