Analyst calls oil at $100/barrel "pretty cheap"

phantom power

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Fri Jan-11-08 10:54 AM
Original message

Analyst calls oil at $100/barrel "pretty cheap"

How is it that I, basically a web-surfing dilettante, understand the concept of "inelastic demand" better than these people who supposedly make their living by selling their superior understanding of the oil industry?

Crude oil at $100 a barrel would still be "pretty cheap" because global oil demand shows no signs of abating and new energy sources are in short supply, a prominent U.S. oil analyst said on Thursday.

Matt Simmons, founder of Houston-based Simmons and Co International, dismissed the idea that a looming U.S. recession will tame crude oil prices, which have tumbled since they peaked above $100 a barrel on January 3.

"Demand is far more durable than anyone ever thought," Simmons told Reuters in an interview. "We're on an insatiable growth curve."

http://www.reuters.com/article/ousiv/idUSN1019749220080110

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NickB79

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Fri Jan-11-08 01:38 PM
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1. "Demand is far more durable than anyone ever thought"

In other words, kiss the idea of demand destruction goodbye. We'll enter a recession and still be paying $100/barrel.

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phantom power

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Fri Jan-11-08 01:40 PM
Response to Reply #1

2. well, what it means is that demand destruction follows the earthquake model.

instead of the pretty equilibrium-driven model favored by economists.

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GliderGuider

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Fri Jan-11-08 01:45 PM
Response to Reply #2

4. Maybe. We could also enter an era of "catabolic collapse"

Edited on Fri Jan-11-08 01:45 PM by GliderGuider

http://www.xs4all.nl/~wtv/powerdown/greer.htm

However, a lot depends on how strongly coupled the network nodes of our civilization turn out to be. The stronger the coupling the greater the shock when the fault slips. Of course we'll probably get some of each, just to make sure we don't get bored on the way.

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GliderGuider

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Fri Jan-11-08 01:42 PM
Response to Reply #1

3. That's how it looks.

We will start converting ever larger amounts of capital into income in order to pay for the oil, because we just can't afford to have the machine stop. Welcome to the cheese slicer.

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