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Bush or Kerry

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#101 AdmiralGT


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Posted 04 November 2004 - 10:07 AM

While supply and demand go hand in hand, the ratio between them does not. Demand for vastly unaffected by the price of oil. Its a primary good, its an essential in most secondary industries and hence people will pay any price to get it. Supply on the other hand is vastly effected by price. When price is low, supply is very small and the oil companies stockpile their oil. Because suuply has been artifically altered (by stockpiling) prices rise. Oil companies stop stockpiling and release oil to the market. If they want to reduce price they flood the market with excess oil (from stockpiles) and prices fall.

This means supply has a much larger effect on price than demand. This is why the main oil producing nations meet to determine how much they will stockpile. However, demand does have an effect on price but only on a local scale (within a city or state) but in the global market price is all down to supply.

#102 Mastermind


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Posted 04 November 2004 - 10:13 PM

Here's the real reason for the increase in the price of oil
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#103 Hostile


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Posted 04 November 2004 - 11:02 PM

MM: Hard to argue with that one! I'm 5'11" and 175lbs so it aint me!

AdmiralGT: Well thought out and well written. Makes alot of sense. Supply and stockpiling does makes sense. Makes more sense than too many vehicles driving in Iraq. :laugh:

#104 Banshee


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Posted 05 November 2004 - 01:00 AM

There are other reasons for the raise of oil price like:

- Yukos (I think it's called that), the main Russian petrol extractor had some corruption problems and production problems. The owner of Yukos, the richest guy in Russia is in the jail.
- In Nigeria, their oil were being sabotaged by rebels. Or their workers went on strike... not sure.

But certainly the war increased a lot the price of the oil. I just want to remind you that in the beggining of 2003, the barrel of oil was being sold by $25 at New York. It recently reached $54, one year and a half later.
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