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289 comments on DrumBeat: October 7, 2008

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joule on October 7, 2008 - 9:42am Permalink | Subthread | Parent | Comments top

Ignorant -

I am ignorant as to whether any economist has actually put forth a classical Econ 101 type of of supply/demand curve for gasoline that even halfway reflects reality and even halfway has any predictive power.

Or is it more the case that both the supply curve and the demand curve are constantly being changed by a whole host of influences that are probably not even fully known much less quantifiable? And in the real world, does supply and demand for gasoline ever really come into equiibrium or is the very notion of 'equilibrium' just a convenient construct, say like a 'point mass' or 'ideal gas'?

As you may have guessed by now, I am not an economist, so maybe these questions are off base, but I get this nagging feeling that many of our basic economic assumptions are due for a major overhaul.

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puhkawn on October 7, 2008 - 10:03am Permalink | Subthread | Parent | Comments top

Try this one for openers:

http://www.econbrowser.com/

Search the site for "energy."

If that's too technical try CARPE DIEM:

http://mjperry.blogspot.com/

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joule on October 7, 2008 - 1:23pm Permalink | Subthread | Parent | Comments top

puhkawn -

Thanks for providing me with those two links.

Unfortunately, as best I can tell neither in any way addresses my question re supply/demand curves for gasoline that I posed above.

So, what is your take on it?

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puhkawn on October 7, 2008 - 1:50pm Permalink | Subthread | Parent | Comments top

See my comment about a melange gumbo.

My seat of the pants guess is that the near term is still down in gasoline prices. The Gulf coast is coming back on line, the economy is weakening, the dollar is strengthening, go figure, and the perception is for lower prices. Supply is increasing and demand still seems to be going down plus a stronger dollar equals cheaper gas at the pump is my guess. Remember this comes from the seat of my pants.

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xeroid on October 7, 2008 - 5:34pm Permalink | Subthread | Parent | Comments top

The price just balances actual supply and actual demand - if you know what they will be at every price you can predict the price of the balance point. Clearly an impossible task as the pundits prove every hour of every day! Don't waste your time, life is too short.

All you can say is if the price is falling relative to income there is potentially adequate extra supply (albeit maybe at a higher price) peak oil is a nonsense and we are all saved, and if the price is rising and becoming less affordable, supply is inadequate to meet current growth aspirations.

Actually, since people the whole world over have aspirations for economic growth and Governments are desperate to make it happen, but oil supply is basically flat, expect the price of oil to rise as a proportion of income.

Whether you think your income/wealth will fall in real terms (deflation) or the prices will rise (inflation) I leave up to your seat of pants to guess - but at the moment for most people (although they don't yet fully realise it) deflation has, by far, the upper hand. You only feel the full effect of inflation or deflation when you buy or sell something!

In an era of deflation your accumulated wealth declines, in an era of inflation your real income declines - so in the long run you probably lose out either way unless you have some kind of hedging strategy.

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289 comments on DrumBeat: October 7, 2008

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