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I don't get why the prices jumped so much - looks like panic and hoarding because: - The Middle East produces roughly 30% of the world's oil - But about 20% o
by pzo 7mo ago
I don't get why the prices jumped so much - looks like panic and hoarding because:
- The Middle East produces roughly 30% of the world's oil
- But about 20% of total global oil consumption flows through this strait (less than 30% because of of domestic consumption and some pipelines avoiding strait)
I would understand if prices increases e.g. 50% but like more than 100% seems like a panic or manipulation
- lokar 7mo agoIt would make sense if there was mostly inelastic demand for 80% of current production. I'm not sure if that is the case, but it might be. There is a lot of usage with no good substitute.
- tencentshill 7mo agoI had this thought as well. But oil prices are set globally on the exchanges, even oil that never leaves the US is affected.
- alexgieg 7mo agoOil demand is mostly inelastic. No matter how much or how little is produced, those who need it NEED it, so they'll compete with all others who similarly need it. The richest ones from among them get the oil first, and the poorest get nothing. The end price ends up being a function of how much oil is available versus how much the richest countries' absolutely irreducibly need for oil is versus how much wealth those countries can throw at the problem not to be left without before someone else with deeper pockets gets it.
- orwin 7mo agoAlso, a third order effect of oil inelasticity is that if it cost too much , it decrease production and trade (might be less true now, but it was absolutely true in 2010), it lowers global demand, so the prices go down. Which is why markets can't predict oil prices, not really.
- frankharv 7mo agoI agree. Why is domestic oil linked to global oil price? We are energy independent? Big Oil is milking US.
- bethekidyouwant 7mo agoif someone wants to buy American oil for twice the price overseas then it’s not gonna go to your local gas station…
- ElevenLathe 7mo agoThis is the exact reason that prices for U.S. benchmarks (e.g. WTI) are diverging from international ones (e.g. Brent). The spread between the two is the largest since 2011 and widening. There is only so much export capacity in the U.S., so there will be a glut compared to the rest of the world as a whole. U.S. prices are up, but international prices are up even more.