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Originally Posted by tracy
Oil at record prices again today. Boring.
Does anybody really care anymore about the price of oil? Certainly Wall Street doesn't, as it rightly puts its faith in Say's Law: supply creates demand. Cut the price of oil, and more will be used; increase the price, less demand. A law as old as the hills.
Recommended reading for Peak Oil fanatics: "The Doomsday Myth: 10000 years of economic crisis" (Hoover Inst Press, Stanford).
Yawn.
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Supply doesn't create demand. First year economics. Check out a supply/demand curve. It's a reflection of the quantity of a product supplied/demanded by the market at a given price. If you artifically adjust price, then there's a market imbalance between what customers demand and what the market is willing to provide. It can create artifical "shortages", or "surpluses" and mess with the curves, but it doesn't create something from nothing.
Supply does not create demand. Demand is always there, whether there's a supply or not. Oil is a bad example for you, as it has a really inelastic demand, meaning that in general the same amount of oil will be demanded by the market irrespective of the price, except at the extreme ends of the curve. I'm going to fill up my car today, whether it's $10 or $50. Same with most people. That's why it's inelastic, and that's why your theory is sorely flawed.
No, people do care about the price of oil. Wall Street is freaking out over it. This is the technology bubble all over again, and it'll be much worse when it bursts.