Wednesday, August 10, 2005

Supply and demand

The AP discusses record oil and gas prices - and points out that they're not stopping anybody from consuming:
Oil prices zoomed higher today, touching a new high of $65 U.S. a barrel, with buyers focused on refinery snags and what they think are shrinking U.S. inventories of gasoline.

The latest rally — crude futures have risen 14 per cent in three weeks — highlights just how nervous the market has become about virtually any threat to output, even though analysts say the U.S. has adequate levels of fuel in inventory to offset routine supply disruptions...

Gasoline prices averaged $2.37 U.S. a gallon nationwide last week (in the range of 95 cents a litre in Canada), while demand picked up by 1.4 per cent from a year ago, according to the government data.

For all the complaints about high prices, if nobody is buying any less gas than last year, then nobody can realistically expect oil companies to reduce prices simply for the sake of making the public happier. It's by buying less fuel now that people have the opportunity to both drive prices down, and ensure that less of a scarce resource gets used up. We'll see how long prices have to stay this high before many people will decide to follow that path.

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