I bet you've been saying that since oil was $95. I'm only being obstinate because I've thought about for so long. I didnt start off thinking it was supply. I started off thinking like you are right now. However I KEPT thinking about it and eventually arrived to what I see as the only logical conclusion.
logically, it would have been smarter for the u.s. to invade saudi arabia, considering they have larger oil reserves. another shortcoming of the bush administration
Wow your kidding right? Pre Boskin Commission measured inflation is running near 10%. The only reason Bernanke lowered rates was to save the banks at the expense of more inflation. He is this generation's Arthur Burns. He bailed out Bear Stearns with taxpayer money. Christ he's letting the GSE's at the window and the Treasury is allowed to buy GSE stock. Is it anymore obvious that the government is doing everything possible to save the banks at the taxpayer's expense?
Maybe. I don't know. But I'm sure, assuming for a second that I'm right, there is a lot more to it then just going where the most oil is. Maybe we are in Iraq only to invade Iran who is the most likely to start taking pot shots at oil tankers with missiles...who knows. I dont think any of us here know enough about that to make any logical deductions.
pekelo would have you all believe that there's a teeny weeny bit of oil left in the ground, underneath the ocean beds, and underneath the rock and permafrost that covers the earth (let alone the deserts). He also would have you all believe that there won't be technological advances that will make extracting that oil cheaper and faster than ever. Don't even mention shale to him. This planet contains so much oil, we've only begun to discover the bare amount that flows nearest to each surface of any given spot. Earth is a big planet full of oil, and we'll always make sure we can maintain adequate supply. Oh, I almost forgot. There are hybrids and diesels that get 50mpg+ on the highway now (the VW Polo Bluetec Diesel gets close to 80mpg - a conventional Toyota Corolla gets 40mpg on the highway). Industry is figuring out how to double or triple the energy extracted from oil. Solar panels, wind mills and natural gas will help make us less reliant on crude than in the past. I'll be damned if we don't achieve 100mpg cars within 6-8 years. With efficiency gains like that, one barrel of oil will go 3x as far as it used to, or more. And that's just the beginning.
There is not a linear relationship between the % increase in demand and the % increase in price so your statement is nonsensical. If output is 100 and demand is 102 then the price will continue to rise until some of the demand is removed and equilibrium is restored. Yes, the price of something with a constrained supply can easily double with just a marginal increase in demand. Price elasticity of demand (http://en.wikipedia.org/wiki/Inelastic_demand)
Maybe the relationship isn't linear, but demand isn't rising linearly either. Look at the barrels consumed per day for the last 10 years. BTW thanks for making a good and logical point.
Well no crap oil's huge rise wasn't entirely supply & demand (although the wars certainly don't help). I guess I should have been more clear I was referring to the invisible hand correcting the market.