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Re: Why Did Oil Prices Drop?

 
 
chuckcar
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      10-11-2008
"philo" <(E-Mail Removed)> wrote in
news:(E-Mail Removed):

>
> "Buffalo" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed)...
>> Anyone or everyone know?
>> I don't.
>> Sounds like the greedy got burnt and stopped speculating on oil.
>> What is the real reason??
>>
>>

>
>
> The law of supply and demand applies.
>
> I heard a radio interview with some OPEC member explaining in a
> condescending manner how
> the price of oil does not follow the law of supply and demand...but of
> course
> was proven wrong
>

I would guess he was talking about elastic and non-elastic demand (I
*think* the term is - it's been a while since high school economics).
Can't recall which is "demand sensitive" and which isn't, But an example
would be milk in western countries. The demand stays the same despite
price due to it being a necessity. There is a certain amount of truth to
this with oil and gas. You have to put more gas/oil in the car/furnace
sometime or revert to public transit/winter.

--
(setq (chuck nil) car(chuck) )
 
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HEMI-Powered
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      10-11-2008
chuckcar added these comments in the current discussion du jour
....

> I would guess he was talking about elastic and non-elastic
> demand (I *think* the term is - it's been a while since high
> school economics).


The corect term is inelastic. For the unitiated, elastic demand
says that price is the primary determinant of consumption while
inelastic says that people will buy no matter what the price.

We can debate elastic vs inelastic for oil until the cows come home
but I've always liked cigarrettes as the best example for inelastic
price behavior - no matter how high it gets due to taxation for
either revenue or to attempt to reduce the demand, smokers will pay
it.

Can't recall which is "demand sensitive"
> and which isn't, But an example would be milk in western
> countries. The demand stays the same despite price due to it
> being a necessity. There is a certain amount of truth to this
> with oil and gas. You have to put more gas/oil in the
> car/furnace sometime or revert to public transit/winter.
>

Elastic is the one that is demand sensitive meaning that people buy
more when the price drops and less when it rises. This is the
fundamentals of the easier kind of economics to understand - micro
economics. The far more difficult macro economics must be
considered when there are wide ranging and multiple constraints and
encouragements of the normal supply and demand equation, including
taxation, regulation, monetary policy, etc.

--
HP, aka Jerry

"Don't say 'can't' when you really mean 'won't'"
 
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