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Oil demand is extremely inelastic. Sure, if oil goes to $300 a barrel and stays there, we'll figure out other ways of getting from A to B. But the next day and

by netsp 17y ago

Oil demand is extremely inelastic. Sure, if oil goes to $300 a barrel and stays there, we'll figure out other ways of getting from A to B. But the next day and the next year, we will be trying to consume the same amount of oil regardless of price. That's why it is not unimaginable for oil to go to such a high price suddenly.

lsc 17y ago
hm. My impression, and this could be wrong, is that there are a lot of people making so little money that if commuting costs more than doubled, it would no longer make economic sense to drive to work. where I live, If I am willing to double commute time, I can use public transit. If you only make $10/hr, it doesn't take much of a price increase before taking the bus starts making sense.
- netsp 17y ago
  I'm not sure about that particular effect, but lets assume that you are right. It's a great example of how painfully inelastic demand for oil or oil derived goods (getting to work in your car) is. The way that higher prices will reflect in lower consumption is people not getting to work in the morning. That's a big deal.
  - lsc 17y ago
    Or, maybe they will carpool, or hold their noses and take the bus. where I live, nobody uses the bus, but if you give yourself 2x the time plus an hour, you can get just about everywhere on public transit.
    - netsp 17y ago
      Or move closer to work or buy motorcycles. Point is, it's not like Mac instead of a Windows, it's like margarine instead of butter. Change hurts.
      - lsc 17y ago
        Yeah. it sucks to be poor, especially as commodity prices rise. A friend of mine thinks that the commonness of single-ply toilet paper reflects a recent fall in the real standard of living of the common man. I'm not saying it'll be pleasant (especially for the poor) I'm just saying that as the price of oil goes up, there will be less of it bought, if for no other reason than that there are many people who simply can not afford to pay much more than they are paying now. This effect dampens price spikes.

by netsp 17y ago

lsc 17y ago

hm. My impression, and this could be wrong, is that there are a lot of people making so little money that if commuting costs more than doubled, it would no longer make economic sense to drive to work. where I live, If I am willing to double commute time, I can use public transit. If you only make $10/hr, it doesn't take much of a price increase before taking the bus starts making sense.

netsp 17y ago
I'm not sure about that particular effect, but lets assume that you are right. It's a great example of how painfully inelastic demand for oil or oil derived goods (getting to work in your car) is. The way that higher prices will reflect in lower consumption is people not getting to work in the morning. That's a big deal.
- lsc 17y ago
  Or, maybe they will carpool, or hold their noses and take the bus. where I live, nobody uses the bus, but if you give yourself 2x the time plus an hour, you can get just about everywhere on public transit.
  - netsp 17y ago
    Or move closer to work or buy motorcycles. Point is, it's not like Mac instead of a Windows, it's like margarine instead of butter. Change hurts.
    - lsc 17y ago
      Yeah. it sucks to be poor, especially as commodity prices rise. A friend of mine thinks that the commonness of single-ply toilet paper reflects a recent fall in the real standard of living of the common man. I'm not saying it'll be pleasant (especially for the poor) I'm just saying that as the price of oil goes up, there will be less of it bought, if for no other reason than that there are many people who simply can not afford to pay much more than they are paying now. This effect dampens price spikes.