RE: [OPE] Reflections on the oil price controversy

Date: Wed Jul 16 2008 - 09:32:33 EDT

> I am not quite convinced that speculation is the main reason.> 1) If demand is rather inelastic (vertical) then > no matter how marginal the excess demand is you > will get a steep and rapid price increase until > there is no more willingness to pay. It becomes > and auction and governments are very eager to have oil - almost at any price.
Hi Anders and Jurriaan:
A relatively inelastic demand curve for oil (and oil 
derivatives, including gasoline) wouldn't negate the
role of speculation. Indeed, it tends to reinforce it!
The speculation on oil is  primarily about how much 
prices will increase, not what the level of demand 
will be: speculators take for granted that the 
price elasticity of demand for oil is relatively inelastic.
 > 4) In my opinion oil has not been priced > competitively for a long time. 
Cyrus has written about this quite a bit and has
suggested (and here I paraphrase) and the oil
industry has been a lot more competitive and
there has been a lot more competitive pricing 
than is commonly appreciated.
You didn't mention "peak oil". 
What do you (and others on the list) think about 
the "peak oil" hypothesis and its relevance to this
In solidarity, Jerry

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