3 ms·
Why wasn't the oils producers reducing their production fast enough to prevent the price from crashing. This to me looks like a lag and inelasticity in how the
by billfruit 7y ago
Why wasn't the oils producers reducing their production fast enough to prevent the price from crashing. This to me looks like a lag and inelasticity in how the oil producers are responding to demand.
- MattGaiser 7y agoHow do you choose who reduces? A lot of the lower-cost producers are happy with this as long term their competitors will fail.
- altcognito 7y agoIt's a good question, but a number of producers are trying to put others out of business. I don't know that this was necessary considering the drop off in consumption, but perhaps the point is to generate a supply shock in order to make a bigger point.
- snarf21 7y agoI was listening to some a podcast when oil first dropped and they were saying the issue is that a lot of the small producers are on leases and then may have to pump at a loss just to keep it and try to make it up later. Or burn everything they already spent. A lot went all in and levered up and are now stuck. Additionally, if SA stops pumping, then Russia gets all their revenue (even if it is lower per barrel). It is a great big game of chicken.