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To: Alberta's Child
"Oil was around $15/barrel in the late 1990s and has been as high as $140 in recent years. Does anyone out there really believe that the demand for oil has increased ten-fold in the last 15 years, or that the supply today is around one-tenth of what it was 15 years ago?"

The shape of the supply curve for oil is not linear. In fact, it is particularly curved and nearly vertical (highly inelastic in the short run) as you approach full production.

Similarly, the shape of the demand curve may be highly inelastic in the short run; people gotta drive to work.

So, it is entirely possible for the Chinese to create an additional 10% demand, and the price therefore rise 100%. Or a 50% increase in demand to cause a 500% increase in the price.

We've got curves here, not lines.

Nonetheless, one of your points is well taken: monetary profligacy masks all sorts of economics. Oil prices could be considered a speculative bubble, for example.

11 posted on 04/24/2013 8:56:46 AM PDT by Uncle Miltie (All observant Muslims want to kill you. If they don't, they are not really Muslims.)
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To: Uncle Miltie
Understood.

One of the interesting things about oil is that it is also subject to local price pressure even though it is bought and sold on a global spot market. I'll bet most folks don't know that there's actually a glut of oil here in North America. Quite simply, we are extracting crude oil from the ground faster than we can transport and refine it. That's why the price for West Texas Intermediate has been markedly lower than Brent Crude for several years -- even though WTI has historically been more expensive.

12 posted on 04/24/2013 9:02:25 AM PDT by Alberta's Child ("I am the master of my fate ... I am the captain of my soul.")
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