Oil is actually far from a perfectly elastic market because it is far from a truly free market. The words "cartel" and "oligarchy" have a lot in common. Oil and gas are HIGHLY regulated & taxed commodities and this affects supply side enormously. Prices do NOT purely reflect demand for gas in the way that free market demand is usually considered.
In fact, the comments on the news this morning are telling - with 20%+ of America's domestic oil production out of commission, prices are up. This reflects a form of hedging/futures trading/gouging. Supply today is the same as it was yesterday -- it will be days or weeks before the lack of production in the Gulf of Mexico will actually impact the market in a true way. And, in fact, Bush is going to be "releasing petroleum reserves" to counter the drop in Gulf Supply and to influence pricing.
no subject
In fact, the comments on the news this morning are telling - with 20%+ of America's domestic oil production out of commission, prices are up. This reflects a form of hedging/futures trading/gouging. Supply today is the same as it was yesterday -- it will be days or weeks before the lack of production in the Gulf of Mexico will actually impact the market in a true way. And, in fact, Bush is going to be "releasing petroleum reserves" to counter the drop in Gulf Supply and to influence pricing.
It is just So. Far. from simple economics.