One axiom that is frequently used is that high prices will lead to an economic slowdown which will then lead to lower demand and then lower prices - economics 101.
I'm just wondering if the oil producers are willing to allow this game to be played. Since it is to their long-term benefit to keep oil in the ground for future sale (at ever higher prices) when demand drops they can just cut production to an extent that there is still a slight shortage. The result will be that demand will fall, but prices will remain high.
This failed in the past because OPEC was in disarray and because it didn't control enough of the supply. Now OPEC may be in less disarray, non-OPEC states have lower ability to make up for their cutbacks and the non-OPEC states may also decide that hoarding for the future is to their benefit as well.
It's like when the waters rise on the Mississippi, sometimes all you can do is standby and watch; poor planning in the past brings disaster in the present and there is nothing to be done but suffer.
The question is what will the industrialized nations do in response to oil prices which cripple their economies? Obviously restraining speculators and issuing new exploration permits are not going to do anything. So what real steps can be taken?
The US has only developed one tool to control its access to worldwide resources - the military. Just because this approach didn't work in Iraq doesn't mean it won't be tried again elsewhere. Causing a change in government in several Latin American countries is relatively easy, no bombing or invading needed. New client governments in Venezuela or even Mexico might do wonders for short term supplies to the US.
If anyone sees realistic steps than can be undertaken in either the US or EU to affect demand over the short (1-5 years) term I'd like to hear them. Policies not Politics ---- Daily Landscape
How do we know that Chinese (say) demand won't make up for "demand destruction" in The West™? That would prevent a gap between production capacity and actual production from developing, which would provide OPEC (say) with plausible deniability ("we're producing all-out!"). They don't have to develop new fields. 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
If anyone sees realistic steps than can be undertaken in either the US or EU to affect demand over the short (1-5 years) term I'd like to hear them.
If supply is constrained, price will go high enough to cause demand to be affected. We're in that process now. In the long run, we're all dead. John Maynard Keynes
We can also cut demand for food stuffs by allowing millions to starve to death, but I don't think that is the preferred solution to rising prices. Policies not Politics ---- Daily Landscape
In other words, you'd ensure that within a couple of decades, there wouldn't be ANYTHING left to sell. And everything would have been sold at a low price in the meantime.
So, even if there was no unstoppable transition because of global warming, we couldn't do anything about the fact that we have used up over half of the total supply, even though many countries, now using a lot of oil, almost didn't use any of that half. Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
Pretty much describes UK energy policy.... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
