[SunTzuWu]

An increase is supply has the same effect as a dip in demand. I think the author is too fixated on the demand side of the equation.

[expat2]

If prices were set by suppliers and customers, this argument might be correct. However, there is a large number of gamblers and speculators who bet on whether oil prices are going to rise or fall in the future. These bets largely determine the price at any one time.
If the speculators are emotionally bullish, then the price will be significantly higher than it would be if they did not exist. Similarly, bearishness will lead to a lower price.

These derivatives and the associated gambling and speculation make prices much more volatile than they would be otherwise.

[TBP]

Let’s increase supply even more. The ones who will get hurt are the Russians, the Iranians, and the Venezuelans.

[Bluestocking]

The supply of oil is not determined by the free market. It’s determined by the head of the OPEC cartel who is the king of Saudi Arabia. If global demand for oil increases, the king can simply open his country’s oil spigots larger to meet the demand and thereby keep the price of oil the same.

It’s different with other commodities, since the price of oil alone is fixed by an evil, selfish dictator who doesn’t care about the economic consequences of his policies for his own citizens, let alone the citizens of other countries.

On the other hand, the leader of the greatest coffee-producing country in the world, Colombia, is a democratically elected prime minister who would be thrown out of office if he interfered with Colombia’s coffee producers by manipulating coffee prices at their expense, as the king of Saudi Arabia is doing by manipulating oil producers in his country.

None of the experts predicted the recent 50 percent drop in oil prices because they didn’t know what the king of Saudi Arabia was planning. And they still don’t. So why continue to pay attention to the experts’ predictions any more than to the predictions of a gypsy fortune teller?