Mathman Prophecy

Offshore Drilling Isn't the Answer - Supply and Demand Is

jaybird,

Read my post again. Diesel and jet fuel were seperated from gasoline, and paired up with petro-chemicals. Gasoline, therefore, accounts for ~45% of a barrel of oil, and everything else accounts for 55%. I am correct, you're just not reading what I wrote.

Offshore Drilling Isn't the Answer - Supply and Demand Is

Actually, short term demand for oil has been proven to be IN-elastic. IF gas prices go to $5 or $6, I'll still have to drive to work in my gas guzzling truck. However, in the long run, people will end up car pooling, driving less, buying fuel efficient vehicles which would then help curb demand -- if not just curb the growth of the demand. Besdies, America's Oil consumption is about the same as it was in 2004. Also, even if supply will increase at a later date, it can have dramatic effects on prices today.

However, a more importnant point many people refuse to acknowledge is what a Oil is used for. Most of a barrel of oil is used to produce diesl fuel for things like trucks, ships, trains as well as various oil fuels for industrials, jet fuel, asphalt, tar, home heating oil, propane, wax, and other petro chemicals like beauty products, plastics, synthetic fabrics, and pharmaceutical drugs. Thus, less than 45% of a barrel of oil is actually converted into Gasoline.

Since most of the consumption of oil is Not as a result of driving cars, an economic down turn results in industrials to produce less products, thus curbing their use/demand of oil. This is also why price of Oil has been cyclical - rising during good times, and falling during recessions.

Here's an interesting fact to consider: 9 of 10 previous postwar recessions began shortly after a big spike in the price of oil. Yet, those recessions always slashed oil prices dramatically. People who have been predicting both a nasty US recession and $250 oil prices are contradicting themselves.

(To give credit where credit is due, the information I cite is from an article written by Alan Reynolds of the CATO institute. )