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Strategies & Market Trends : ahhaha's ahs
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To: FR1 who wrote (50)9/27/2000 11:14:02 AM
From: ahhahaRead Replies (1) of 24758
 
Why would an oil minister know anything about fuel cells or about oil for that matter? The Arab's judgement about how to manage oil has been perfectly awful for 50 years. They always choose the Harvard way. For example, in order to raise the price from depressed levels they cut supply. When they started doing this world demand was already strong. Right action would have been to fiat raise the price. They needed to slow demand, not slow supply. If they had raised price, competitors would have simply marked their oil up similarly because the Arabs are the low cost producers and the competitors were making any money at $11/bbl. Raising price would have enabled the Arabs to gradually raise prices to say $22 where it could steadily stay for many years.

By cutting supply the Arabs changed the structural nature of the market and thereby have encouraged the production of new or shut in marginal supply. None of this has much if any impact on fuel cell development except for some socialist government knee jerk reaction in order to look good to the public by throwing money at some program to stimulate alternate fuels. The new supply incentive and the changed mentality brought by higher price will cause price to come tumbling down next year to say, $15/bbl, and the doomers will quietly disappear.
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