You have to consider world demand for oil, not just US demand. Look at demand from China, for example. Also, gas prices <i>are</i> down significantly from say 2 years ago. This is due to the recession slightly decreasing energy demand in Western countries. Should world demand increase back to the levels of 2008, then you can expect gas prices to return to 2008 levels as well. Bettles
Also, gas prices are down significantly from say 2 years ago. ----------------- Sorry, I find no comfort in that fact but many people do and somehow this is supposed to make it okay. Prior to previous rise gov't predictions forcast no dire energy needs. The first spike was a head fake so we could be grateful for 3 bucks a gallon .
So law of supply and demand apply to this. Lower demand - high price, higher demand - lower price, isn't it?
u must also understand that speculation pushes the price of crude up, and gasoline along with it. All the liquidty may have not gone to main street,but the commodity makets are up from the low intrests rates since march. there is actually a supply glut in crude atm. Real demand from china cannot replace Europe / america in one year.
While I think speculation did probably add 20-40% to the price of oil back in the summer of 2008, the inelasticity of oil demand guarantees that that same price level would be met again even with zero speculation when world demand gets a percent or two over what it was in 2008. Barring significant breakthroughs in energy technology of course. Want to stop speculation in oil and other commodities? Stop flooding the economy with easy money, and set interest rates at something reasonable. Of course people are going to speculate when interest rates are so low. Why would someone put their money in a CD or US bonds when the yield is far below inflation? Instead, they speculate with the money, because that is the only way to (possibly) preserve value. Put interest rates at 10% as they were during the great stock bull market of the 1980s and see if you don't see $50 a barrel oil (at least for a couple years until demand from rapidly developing countries such as China and India make up for the speculation premium). Bettles
Agree. And who knows what is really happening in China. They lie. Ever deal with them... yes means no. No means yes. Depends what "is" is. Its all BS wit them, currency and all.
There are several factors that may cause a shift in a good's supply curve. http://www.netmba.com/econ/micro/supply/curve/