But it makes me think that oil prices get inelastic when supply and demand are close.
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well now imho you’ve changed the definition of elastic.
I presumed that elastic just means that price is very sensitive to supply and demand. whereas inelastic means that price is not sensitive to supply and demand.
current low prices are not only stimulating demand but they’re also killing investment in future oil production—especially in deepwater projects that the majors typically engage in.
that means that in the future somewhere—rising demand is going to be met by smaller supply.
there will be one last hurrah for oil before electric cars natural gas trucks and buses and others start to take a real bite out of demand sometime after 2020.
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.