4 ms·

Decreased demand would tend to result in reduced prices, not increased prices.

chrismorgan 6y ago
The laws of supply and demand only work that way if supply is limited, which is very often not the case. A lot of production benefits from economies of scale, where fixed overheads are dwarfed by unit costs. In such cases, decreased demand results in reduced production, which results in the loss of economies of scale as production overheads remain the same or similar, thereby increasing in magnitude relative to unit costs. Maybe it costs ten gajillion dollars to produce one litre of petrol, but twenty gajillion dollars to produce one bazillion litres of petrol.
- jonfw 6y ago
  We are thousands of times over capturing economies of scale in gas production, we support thousands of independent drilling and refining sites.
peteradio 6y ago
Only instantaneously. In the long term supply decreases to meet decreased (now niche) demand which decreases duty cycle on operations, hence increasing per unit cost.
- mypalmike 6y ago
  Refined petroleum products will certainly not be niche within a decade. So much of global transportation simply can't swap out ICE with electric now, or in many cases ever. Huge swaths of the globe lack the electrical grid infrastructure to entertain even small moves in that direction. And huge numbers of drivers in countries with adequate infrastructure can't plug in at home due to living in apartment complexes, urban street parking, etc. Electric transport is a great growth area but it will not make gasoline niche any time soon. More likely the decreasing cost of electric transportation options will have downward competitive price pressure on gasoline.
  - a9h74j 6y ago
    I have seen one concern expressed as potential imbalance in demand for different refined components. For example, if demand for diesel were to hold steady, but for gasoline diminish, to some degree gasoline potentially becomes a leftover pollutant.

The laws of supply and demand only work that way if supply is limited, which is very often not the case. A lot of production benefits from economies of scale, where fixed overheads are dwarfed by unit costs. In such cases, decreased demand results in reduced production, which results in the loss of economies of scale as production overheads remain the same or similar, thereby increasing in magnitude relative to unit costs. Maybe it costs ten gajillion dollars to produce one litre of petrol, but twenty gajillion dollars to produce one bazillion litres of petrol.

jonfw 6y ago
We are thousands of times over capturing economies of scale in gas production, we support thousands of independent drilling and refining sites.

peteradio 6y ago

Only instantaneously. In the long term supply decreases to meet decreased (now niche) demand which decreases duty cycle on operations, hence increasing per unit cost.

mypalmike 6y ago
Refined petroleum products will certainly not be niche within a decade. So much of global transportation simply can't swap out ICE with electric now, or in many cases ever. Huge swaths of the globe lack the electrical grid infrastructure to entertain even small moves in that direction. And huge numbers of drivers in countries with adequate infrastructure can't plug in at home due to living in apartment complexes, urban street parking, etc. Electric transport is a great growth area but it will not make gasoline niche any time soon. More likely the decreasing cost of electric transportation options will have downward competitive price pressure on gasoline.
- a9h74j 6y ago
  I have seen one concern expressed as potential imbalance in demand for different refined components. For example, if demand for diesel were to hold steady, but for gasoline diminish, to some degree gasoline potentially becomes a leftover pollutant.