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"As a result, he thinks, the worldwide price of oil would inch up by only 1 percent." This is total ivory tower quackery. Not even professional oil traders ca
by nicholas73 10y ago
"As a result, he thinks, the worldwide price of oil would inch up by only 1 percent."
This is total ivory tower quackery. Not even professional oil traders can predict oil prices 1 year out.
Oil fundamentally has boom and bust cycles, due to large investments in time and capital, and its demand inelasticity. That means that supply imbalances cause wild swings in price.
Supply is not a constant function and cannot be predicted with so many actors. You cannot reasonably assume players will manage the supply/demand balance. In fact, they are incentivized to allow it to swing to either extreme (longer discussion).
Long story short, you do not f* with supply sources.
- ErikVandeWater 10y agoThe 1 percent claim is probably ceteris peribus: 1 percent greater than it would otherwise be. Not very well written though.
- nicholas73 10y agoEven that would not result in a mere 1 percent increase. Oil inelasticity is extreme - can anyone think of a better example besides food and water? Total world demand is ~96m bpd, and a mere 2m bpd oversupply caused the price to collapse from $100 to $26 at lowest. The only time 1 percent might be plausible is if oil had already reached prices so high it's near the marginal benefit for consumers, or over long long periods of time (but who cares, since you would have to pay exorbitant prices in the meantime).