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Glibly, because the theory of self-correcting markets only works in economists' minds, not in real life. Oil price is affected my many variables including spec
by altacc 4y ago
Glibly, because the theory of self-correcting markets only works in economists' minds, not in real life.
Oil price is affected my many variables including speculation, supply & demand, latency and panic buying, but the supply is artificially controlled to maximise price and political leverage. If OPEC decided to announce a significant increase in production then the price would drop. But there is no real incentive for them to do this as they are maximising profits already and selling more for less doesn't benefit them long term. some of the oil producing countries want to exert political influence via oil supply (especially Saudi Arabia), essentially forcing forgiveness for bad governance and human rights abuses.
- rkangel 4y agoBut actually the underlying price of crude hasn't been ridiculous, whereas the price of petrol at the pump has skyrocketed. It's the gap between the two that has grown and hence oil company profits.
- lotsofpulp 4y agoCrude price is historically high: https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha...
- refurb 4y agoBut apply the same logic to any other product. If you made widgets, and you knew demand was 5 units, would you make 20? Of course not. The power of OPEC has also decreased over time as other sources of oil have made up a larger percent.
- pibechorro 4y agoSelf correcting markets work. They dont work like you think they should. The timeline is longer and the correction may not be fuel prices going down, rather alternative solutions popping upbto replace a no longer affordable solution.
- imglorp 4y agoIt's across the industry -- they're all rocketing vs the market. Collusion? Or maybe they just came to the same conclusion that scare-quotes "inflation" is in the media so it's a swell time to pretend.
- lotsofpulp 4y agoOr the media is pumping out rage/click bait as usual. Which is why you see articles reference profit, rather than profit margin.
- dontcare007 4y agoSelf correcting markets work, when the government doesn't reduce the supply, reduce exploration, close down pipelines, and then make the oil company's out to be the bad guys.