Wednesday, June 01, 2011

More political misapplication of demand and supply analysis--almost

More political misapplication of demand and supply analysis
I suppose the idea is that expectations of low prices will cause suppliers to sell more now at high prices to avoid losing out when prices actually fall. The ECON 101 analysis is impeccable. Yet, new supplies won't do much to bring down prices (0% to 3%). The mistake is shifting the demand and supply curves too much.

At least you are recognizing the effects of expectations -- and I assume taking into account the discount rate. But even ANWR is supposedly only reduce oil prices by 3% WORLD WIDE, we are still talking about an inelastic demand curve as noted here: Environmental Economics: Is the own-price demand elasticity for gasoline increasing?

If Newt is for "all-out", then do you think we can increase oil production another 1 million from off-shore drilling? Just doing what the Cubans are doing is one thing we could do: Oil Updates: Cuba Discovery. And increasing on-shore continental drilling another million per day. Before long, we might have something there considering inelastic demand curves in the future as well as supply curves...

"Shale Boom in Texas Could Increase U.S. Oil Output"



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