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  • Yes, prices will fall

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  • No, prices will not fall

    23 67.65%
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Thread: Supply & Demand

  1. #11
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    Re: Supply & Demand

    Okay people, now tell me, how can the price of oil fall if we expand off shore drilling which represents the same percentages and when demand is growing at the given percentage?

    How the HELL can prices fall when supply increases 2.3% and demand increases 10.12%?

    It boggles my mind how some people just suspend supply and demand when it comes to oil.
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  2. #12
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    Re: Supply & Demand

    Quote Originally Posted by obvious Child View Post
    Okay people, now tell me, how can the price of oil fall if we expand off shore drilling which represents the same percentages and when demand is growing at the given percentage?

    How the HELL can prices fall when supply increases 2.3% and demand increases 10.12%?

    It boggles my mind how some people just suspend supply and demand when it comes to oil.
    Well, technically they're correct in the sense that the price will be lower than it would otherwise be (albeit still higher than the current price). The demand will increase regardless of whether or not the supply increases.

    But I don't support (most) offshore drilling because the environmental consequences are simply not worth the risk...especially since the oil industry is probably only going to be around for another 10-15 years.
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  3. #13
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    Re: Supply & Demand

    Quote Originally Posted by Kandahar View Post
    Well, technically they're correct in the sense that the price will be lower than it would otherwise be (albeit still higher than the current price). The demand will increase regardless of whether or not the supply increases.
    True, but that's not what they are talking about. Some seem to think that we can actually lower prices by drilling more yet fail to recognize that supply cannot catch up with demand. Some loonies cite the 87 billion total barrels offshore without realizing what is actually recoverable and the time frame. 10.12% demand compounded over the average 15 years it takes for such oil to reach market and when the additional supply is 2.3%, it doesn't take a genius to figure out that's a losing proposition. But many people can't figure it out. There's a thread detailing that in the energy subforum and none of the "Drill More" crowd has the guts to post.

    But I don't support (most) offshore drilling because the environmental consequences are simply not worth the risk...especially since the oil industry is probably only going to be around for another 10-15 years.
    Honestly, that doesn't bother me. I'd rather just get off the entire system which is geared towards financing Russia, Iran and Saudia Arabia. I don't like funding our enemies. Some people here do. And can you explain to me why so many people think that oil isn't priced on international commodity exchanges?
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  4. #14
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    Re: Supply & Demand

    It seems obvious to me that the second poll option is correct.

    To be more precise, prices will not fall, but they may rise at a slower pace.
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  5. #15
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    Re: Supply & Demand

    Depends. It sounded like you were describing a firm that's in perfect competition (no barriers to entry, non-differentiated product). If that's the case, then price will be unaffected. Demand will be as close to perfectly inelastic as you can get, meaning that any switch in price will upset revenue maximization, which is P=MC (perfect competition form of MR=MC).

    In the case of the oil, you can't go by that. Oil is a naturally occurring oligopoly, and since oligolopical firms in an industry can achieve above normal profit, they are not bound by cost minimization or the simplest functions of S&D to achieve profit. In addition, a lot of the price in oil is not a direct result of supply and demand. It has a lot of red-tape costs and manipulation involved.

    You can't apply the same rules in monopoly and oligopoly industries as you can with perfect competition and monopolistic competition.

  6. #16
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    Re: Supply & Demand

    Quote Originally Posted by Gipper View Post
    Depends. It sounded like you were describing a firm that's in perfect competition (no barriers to entry, non-differentiated product). If that's the case, then price will be unaffected. Demand will be as close to perfectly inelastic as you can get, meaning that any switch in price will upset revenue maximization, which is P=MC (perfect competition form of MR=MC).

    In the case of the oil, you can't go by that. Oil is a naturally occurring oligopoly, and since oligolopical firms in an industry can achieve above normal profit, they are not bound by cost minimization or the simplest functions of S&D to achieve profit. In addition, a lot of the price in oil is not a direct result of supply and demand. It has a lot of red-tape costs and manipulation involved.

    You can't apply the same rules in monopoly and oligopoly industries as you can with perfect competition and monopolistic competition.
    Fair enough, but everything you described furthers my argument that prices cannot drop. With oligopolistic compeition already in play and manipulation, the addition of slowly increasing supply and rapidly increasing demand suggests that up is the only logical conclusion to prices, contrary to the beliefs of some.
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    Re: Supply & Demand

    I really don't get this poll, it isn't something to debate, just an economic question with a right or wrong answer.

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    Re: Supply & Demand

    Quote Originally Posted by obvious Child View Post
    Hypothetical:

    If there are a 1,000,000,000 units of product A, all effectively identical and someone adds 1,200,000 more to the market and demand is annually increasing at 3% (so 30,000,000) will that materially reduce prices?

    *Assume no barriers to purchase for all potential buyers.
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  9. #19
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    Re: Supply & Demand

    Quote Originally Posted by Your Star View Post
    I really don't get this poll, it isn't something to debate, just an economic question with a right or wrong answer.
    Point is that those who think more drilling will lower prices are out of their minds when you apply actual economics.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  10. #20
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    Re: Supply & Demand

    Quote Originally Posted by obvious Child View Post
    Point is that those who think more drilling will lower prices are out of their minds when you apply actual economics.
    Oh okay, I get the analogy. I just thought someone was trying to get me to do their homework for them.

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