Posted on 08/17/2015 9:28:37 AM PDT by Lorianne
Check out the Wikipedia article on price elasticity, which is defined as percentage change in quantity divided by percentage change in price: (dQ/Q)/(dP/P). If the elasticity is low (inelastic) price moves around a lot. I’m pretty certain you’ve got it backwards.
But, it’s just definitions. I think we’d agree that when oil supply is tight relative to demand, little changes in available oil yield big swings in price.
But, it’s just definitions. I think we’d agree that when oil supply is tight relative to demand, little changes in available oil yield big swings in price.
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agree.
right now it doesn’t look like that tightening will happen for another year or three.
That is conventional wisdom currently takes its cue from future’s contracts which for 2017 hover in the +-60@ barrel region.
http://quotes.ino.com/exchanges/contracts.html?r=NYMEX_CL
that’s just conventional wisdom. who knows what the future will bring.
When I worked there it was nearly at full capacity and there were very few drawdowns until 1991 during the Gulf War. Although the original concept was supposed to be strictly to supply the military with oil in case of an embargo it morphed to act as a vehicle to influence the oil market. I believe in the 1991 drawdown since oil prices were up the oil was sold for more than it was bought for. However, since the DoE is supplying all this infrastructure and personnel to take in, store and pump out the oil the cost of the actual oil is just peanuts.
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