Commodity Bubble Proponent

The Ghost of Crude Oil Futures (Part 2/2)

Interesting article

You're point about the oil market prices rising rapidly misses one key point however.

1. Companies will scale back on long term projects, not ones where they have already invested in infrastructure. As a result, most of the new production that has been invested in should get built b/c of the amount of money already sunk into those capabilities.

2,. When OPEC cuts production, they increase spare capacity. As a result, when demand starts to increase, OPEC has spare capacity that can handle the new demand. This acts as a damper to rapid price increases. (Spare capacity is now at a healthy 3 million barrels/day)