The bad, worse and awful news for energy prices

[4dsc]

Has the notion that the "era of cheap oil" resonated enough in the news lately??

http://www.financialexpress-bd.com/index3.asp?cnd=7/11/2006§ion_id=4&newsid=30607&spcl=no

DO not look for energy price stability soon. Lessons from fluctuations in pork prices in the 1930s, which became known as the hog cycle, provide an instructive framework for understanding future energy price movements.

The basic economics of the hog cycle were simple. The demand curve was downward-sloping, with demand quantity dependent upon the price at that point in time: there was greater demand for hogs when the price was low.

The supply curve was as usual upward-sloping, but with one difference: because of time lags in production, supply at a particular time depended on the price in earlier periods. In other words, when hog farmers brought their product to market it was based on historical prices. The time lags between supply and demand created imbalances which led to huge price swings. The same type of mechanism is at work today in energy.

To understand the outlook for energy prices we need to look at whether demand, supply or policy will change and over what time frame. The news on these three elements is bad, worse, and awful, respectively.

[brokensymmetry]

1. K&R n/t

:kick:

[Pooka Fey]

2. K&R#5 for greatest page.

Let's get the 'PO' word out into circulation.

[progressoid]

3. marking this one for a read later tonight.

[Pharaoh]

4. If everyone ran on 4 cylinders in the USA

There would be no energy crisis.

[hunter]

5. No, that's not true at all.

Oil is sold on an international market.

As nations like China import more oil, what we do in the USA matters less.

Much oil we might "save" here in the USA would simply be bought by somebody else. This is an entirely international problem now.

Our only out as a nation is domestic fuel production, and we are probably going to resort to coal. Unfortunately the resulting climate changes are likely to destroy our existing economy. Cars, be they four cylinders, six, or eight, are not going to mean a lot in that environment.