Oil prices & economics

[Paul Rollins <psroll@domain.elided>]

<<A boost from $20 to $30 a barrel for midEast crude of course will have
a
ripple effect on taxes that are a % of a sale.  But if supply and demand
is
such a vaunted law, instead of fulminating on the increase in price at
the US
pump, why not react by using less?  >>

This is known as inelastic demand. Prices can go up a lot before demand
falls. In reality, oil supplies don't vary so much. The producers (OPEC)
say they will cut back production and publish a figure, but the members
see this as an opportunity to cheat. The cheaters see a chance to sell
the same amount of oil at a higher unit price, which translates into
more total revenue. The market probably trades about as much oil as
before the alleged cutback, but at a higher price for a while. When
this becomes apparent, oil prices retreat, as they are doing now.

OPEC isn't as well organized or disciplined as it was in the 70's.

Paul Rollins

------------------------------