Following on from what I said in my last blog about that things aren't always simple, well I forgot to say something else that's crucial. Always be open to ideas, because the scientific method is based upon furthering knowledge by proving ideas wrong. Intuition isn't perfect because if it was we wouldn't need to do any research as we'd know it already, and history repeatedly proves this point.
So I found this article rather interesting because, as the author says, it's generally held that as production of commodities (primarily oil) plateaus and then falls, price will rise and rise since the demand is likely to continue increasing. He states that rather than supply constricted, prices are demand led. OPEC has spare capacity of 5% plus which tempers some price fluctuation, as well as alternative sources take up some slack as the market sorts out its equilibrium again.
It's certainly an interesting read. It's given me some new ideas, but his main argument of there not being a large and continued price increase seems to be okay only in a free market where there are suitable alternatives available and in sufficient quantities. If the fall in oil production isn't matched by increased development of alternatives to compensate (in cost and capacity), then surely prices would rise (although perhaps offset slightly as people reduce consumption where not necessary).
The author says "demand for any commodity is price-elastic" but I would disagree, at least in the case of oil. Oil is rarely used in electricity generation, rather it contributes 98% or so (page 14) to the energy used in transport, and people will usually swallow oil prices rises because of the necessity of getting to work or doing the work (food distribution etc).
The various graphs on this website make for interesting reading as well, the average price has been $20-30 a barrel depending on what timescale you look at. Maybe the peaks are merely bubbles caused for one reason or another (wars, lack of confidence in the market, commercial squabbles, temporary lack of exploration investment?) rather than a sign of long term increases.
So do we think the future is rosy and we don't need to worry about it because the market will find the solutions, or do we need to press the government to make commitments to creating sustainable alternatives?
So I found this article rather interesting because, as the author says, it's generally held that as production of commodities (primarily oil) plateaus and then falls, price will rise and rise since the demand is likely to continue increasing. He states that rather than supply constricted, prices are demand led. OPEC has spare capacity of 5% plus which tempers some price fluctuation, as well as alternative sources take up some slack as the market sorts out its equilibrium again.
It's certainly an interesting read. It's given me some new ideas, but his main argument of there not being a large and continued price increase seems to be okay only in a free market where there are suitable alternatives available and in sufficient quantities. If the fall in oil production isn't matched by increased development of alternatives to compensate (in cost and capacity), then surely prices would rise (although perhaps offset slightly as people reduce consumption where not necessary).
The author says "demand for any commodity is price-elastic" but I would disagree, at least in the case of oil. Oil is rarely used in electricity generation, rather it contributes 98% or so (page 14) to the energy used in transport, and people will usually swallow oil prices rises because of the necessity of getting to work or doing the work (food distribution etc).
The various graphs on this website make for interesting reading as well, the average price has been $20-30 a barrel depending on what timescale you look at. Maybe the peaks are merely bubbles caused for one reason or another (wars, lack of confidence in the market, commercial squabbles, temporary lack of exploration investment?) rather than a sign of long term increases.
So do we think the future is rosy and we don't need to worry about it because the market will find the solutions, or do we need to press the government to make commitments to creating sustainable alternatives?
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