MOrion
Member
- Joined
- Jan 25, 2012
- Messages
- 95
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- Political Leaning
- Libertarian - Right
Do you expect the farmer to grow 15 more acres of corn than there is a market for? What are they supposed to do with all of this extra oil that isn't being used?
Actually, I do expect farmers to grow more than there is a proper market for. As a result of farm subsidies, specifically the Counter Cyclical-Payments, farmers are subsidized when the price of their crops falls below a certain point. So if they can, they have an incentive to overproduce, so that they can make more money from a larger harvest, and also get the subsidy from the gov.
And this is not a very good analogy to the oil markets, because petroleum is the basis of so many industries. Fuel, plastics, waxes, the chemical industry . . . between all the different uses for petroleum, there is literally an insatiable thirst for oil in the modern world. OPEC need never worry about not finding a customer for as much oil as they want to pump.
They are not restricting production.
Ever heard of the "excess capacity" maintained by several countries, mostly Saudi Arabia? That is extra pumping capacity that they could bring online, but choose not to. Hence, they are by definition restricting their production.
No, they are not. Oil is high because it's now not just a commodity but an investment vehicle. If you want to lower the price remove those who are only in it as an investment.
I won't argue that investors and speculators don't influence the price of oil, but on the other hand, I don't think you can say either that it is a bigger influence than the fundamental law of supply and demand.