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By Bal(t)imoron, 4 months and 28 days ago

Must Destroy Demand

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Gravatar #1. Bill
4 months and 27 days ago

People just didn't pay attention at their Econ 101, when they talk about supply and demand curves. They all forgot about the elasticities of demand and supply. They forgot that supply of some goods don't response well with price, or at least not readily. No mater how high the price go, the supply stays the same. And demand of some goods don't response well with rising prices - no matter how high the price go, the demand is still there, at least for a considerable time. Food in poor country is one of them. They are already surviving on a subsistence level. Higher price will not bring down the demand significantly to balance the supply. Oil, unfortunately, is one of those things that both demand and supply are not responsive to price in short term. You need major adjustment, or even rebuilding of the infrastructure and rolling stock to adjust to high price of oil. And you need major investment and construction to increase supply. These all take time.

It is the ignorance about how oil can react to price changes that lead to the speculation theory.

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