Saj Karsan

The GDP Effect of Lower Oil Prices

Hi DTV,

You are right that domestic oil production will have an effect over the long-term, but you wouldn't see a huge change in just a few months. But remember that if US workers are drilling for oil, they're not producing something else (which may or may not be as valuable), so the contribution to GDP is not so clear.

Oil Demand Should Continue to Fall

Hi Jim,

You are right, the reduction in demand is going to have to come from reduction in fuel for vehicles. It will take a while, I agree, but we do see signs of it happening already.

Oil: Does Supply and Demand Still Apply?

Hi Cjworth. That's just not the case. The IEA predicts growth in supply for at least the next two years: www.forbes.com/reuters...

Ozzy, I agree that the size of the wells is not identified. My intent was to show how a high price increases supply activity. If you have data on the size of the fields I'd love to see it. Regarding trends, I'm not saying we should look at the price trend, I'm showing that high prices result in more exploration which results in more supply. It is erroneous to draw a conclusion that we've run out of oil when it's clear from the chart that the oil price was so low for so long that there wasn't any POINT to finding new oil, which is why we're at where we are. By the way, well drilling peaks in 2007 not 2005, and only because that's the last year of data available! 2008 will mostly be higher still, again drive by incentives considering the high prices.

Tern, In no way does this talk down the spot price. It takes time for oil exploration to yield results. My conclusion clearly states this is a long-term effect.

MattB, agreed the supply side was simplified here. This is just one aspect of the supply/demand effect I'm trying to illustrate, but your points are valid.

Lou, you are right, poor choice of words on my part.

Oil Demand Should Continue to Fall

Hi Xpert. You mean in the future? It most certainly would...this is the nature of cycles, as opposed to the "its different this time" argument we hear too often.

Whisper, I agree. The high oil price makes research and development into alternatives viable for the time being, but if the oil price should fall, carbon taxes and other government mandates will be required to stop us from harming the environment.

Thanks for the note Mekats. This article was simply about the demand side, the supply side will follow tomorrow. As for logarithmic charts, this article was intended to educate readers that don't analyze for a living, rather than confuse anyone with industry jargon.

Hi Erew, the massive run-up we see in consumption since the late 80s shows that in the aggregate, the OECD does not appear to have learnt any lessons, allowing for some efficiencies to arise now that they are indeed paying attention.