it is obvious that it's not having an effect on prices
and
it is not obvious that it's having an effect on prices
are not the same. I wrote the second, you claim I wrote the first. Nice attempt at putting the burden of proof on me. In the long run, we're all dead. John Maynard Keynes
Here's another interesting graph showing the lack of elasticity of oil demand (not sure what the 3 lines goign through it are, though):
In the long run, we're all dead. John Maynard Keynes
But production = consumption.
While we have data on "production capacity" and so can look at the supply "slack" (or lack thereof, at present) there's no equivalent data for "demand". 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
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
So far the practical price of energy has hardly changed at all. When gasoline costs $25 a gallon there will obviously be a reduction in demand.
For example, suppose I own a gigantic SUV. If I sell it I'll get enough money to cover about 1/3 the price of a new hybrid (or 1/2 the price of a new conventional compact car), but with a new car I will have to pay a big registration tax and will have to have collision insurance coverage. The savings in fuel cost simply don't cover the extra cost of having a new car.
Plus, my SUV can carry more stuff and go off the road and is more intimidating on the highway and is preceived as being safer. The argument simply doesn't work out when the cost of fuel only doubles.
The chart on Chinese car ownership is an important. Eyeballing it, the number of cars seems to have risen about sixfold over the period in which prices began to skyrocket. And that's just China, and only looking at cars.
Some of the conspiracy theorists are simply people with bubbles on the brain, too, I suspect -- having now seen the housing bubble pop, they're looking at this in the same way, thinking "There's no way prices could rise so quickly due to fundamentals." But, as you know, it's quite possible. And the US energy secretary told us as much when he said they were projecting rises of almost 20% in price for every 1% increase in demand.
You've got a fixed supply and a very inelastic demand curve, so as demand shifts outwards with the emerging markets needing more and more oil, price rises should be quite steep. That's at least what I think is going on. It reads more like a textbook S-D situation than an Enron-style process of manipulation. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
So, it would seem "extraordinary profits" are accruing to producers, be it the oil majors or OPEC. Given that there if no slack of production capacity over actual production (unlike in the 80's), the problem seems to be lack of production capacity. Refining capacity is also a bottleneck.
What speculation does is reduce price friction so that prices can more easily respond to (upward) pressures. Given that industrial developments to increase production capacity take years, and claims (in particular by Francois) that as a price for energy $150/bbl is already too high, it would seem that what speculation has done is create a price overshoot by decoupling the time scale of oil price movements from the time scale of energy infrastructure development. 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
