WHEN DO YOU STOP and stick them with the oil?
Buy an electric heater or a heat pump! That costs even more? Then keep paying whatever they want for the oil. The intermediaries can only sell oil in a circle for so long. At some point a real buyer has to appear to actually use the damn stuff. And they do. And keep paying with only a modicum of whining.
I hear your point and I expect oil will wave down in the next 3-5 years as investment in alternatives and conservation kick in. However, with 1 billion Chinese and another billion Indians still living in 1750 for all intents, there's so much room to grow oil may never really retrace.
agree 100%. Speculation has had input in making the price move much faster to where it was going anyway. Always money to be made in reading the tea leaves and making the market move on YOUR timetable.
But there's no fundamental reason for the price to be higher than $150 - it might stabilize at that level on the argument that at that level alternative energy infrastructure becomes profitable.
2 years abowe $100 and the long-term expectations will set in and change the game. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
In the long run, we're all dead. John Maynard Keynes
For instance, suppose the break-even price is $50, so $80 for 15 years is $30 over break-even for 15 years. Could you get away with $90 over the threshold for 5 years? That would be $140 for 5 years, which you can now perfectly hedge in the forward market. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
And as wind grows, it pulls marginal prices down, thus threatening its own viability. Thus, as I noted before, it's likely that wind will need feed-in tariffs even as fuel prices are very high... In the long run, we're all dead. John Maynard Keynes
You stop when you can no longer afford it, or it becomes "economic" to do something else.
In my case it would be to get the rent reduced (unlikely - but exactly the same dynamics of "rent maximisation" apply), or go and live somewhere else with lower heating costs. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The 'consumers decide the market' bullshit is intellectually offensive. In almost every case that matters, markets are inherently assymetrical. Consumers have a choice to pay, or not pay, but they have no ability to negotiate prices directly, or to push for infrastructure alternatives.
And this is exactly how 'the markets' like it. Real consumer leverage is their worst nightmare, and they'll do almost anything to make sure it doesn't happen.
You could argue that wouldn't make a difference here, because in the case of a demand strike, the producers could always afford to sit it out, because they have an effective monopoly on an essential resource.
Which is true - but since OPEC isn't a monolith, it's hard to imagine that some suppliers might not decide to cut profits in return for sales, and prices would drift downwards.
Almost no product markets are competitive auction markets ... on the one hand, most competitive markets monopolistically competitive fixprice markets, not standardized product competitive flexprice markets ... and on the other hand, the largest value added in the economy is sold into oligopolistic markets.
So if the default was "normal", it would be an oligopolistic fixprice market, and to treat a market as a competitive auction market, you would have to justify that it does, in fact, differ from the norm in those specific ways.
OTOH, with a competitive auction market, Marginal Costs add up to a Supply Curve that is, by virtue of the infinite elasticity of firm demand, independent of market demand ... so you can talk about demand shifts and supply shifts and pretend that they can be independent things, where in 95%+ of all markets in the world, any change in demand elasticity a shift in the traditional Marshallian supply schedule, and a supply shift to a different part of the demand schedule with a different elasticity implies a further shift in supply.
So the default case is what's easiest to talk about with the traditional toolkit, not what's normal. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
the default case is what's easiest to talk about with the traditional toolkit, not what's normal.
the default market in the marginalist economics tradition is the competitive auction market, so a competitive auction market can be assumed by default in a discussion without requiring a defense, but any other market requires defense.
However, this explains why economists attempt to convince politicians to turn everything into competitive auction markets. Energy liberalisation, emissions trading, anyone? When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
The quickest way to half the cost of oil is to use half as much. Lose the big car, insulate your house. Get a heat pump. Car pool.
Of course Joe Blogs can't negotiate with Saudi Aramco, but he can stop feeding demand into the system.
Reminds me of what Mexicans say about cocaine, heroine and marijuana-toking Americans. ... all progress depends on the unreasonable mensch.(apologies to G.B. Shaw)
