Just for my own education can you paint a scenario where that happens? My understanding, which could very well be wrong, of take or pay is that the buyer agrees to take, in this case the oil, for price $X or if they decline to take it they pay price $Y. Assuming the $-.50/bbl company had a take or pay contract with another company at $100/bbl take and $5/bbl pay, if they don't take they pay $5.00/bbl. The $.-50 company gets the $5.00/bbl for doing nothing, even if they close up shop and have a marginal cost of running the company of $0 they still get the $5.00/bbl. So it doesn't make sense why you'd then cut the $5.00/bbl you were going to get for sitting around the house in your underwear and turn it into $4.50/bbl and probably even less because you still have operating costs by signing a stand alone $-.50/bbl contract. Or any contract below your marginal cost of production, which may be $6-$50/bbl? I've never been part of a take or pay contract and admit my ignorance on them, which is why I'm asking how it would work in this case?
