<...it is in the interest of oil producers for the price of oil to fluctuate. The occasional periods of low prices scares off investment in competition or substitution. Alternatively, the occasionally high prices might scare off development of oil-intensive technologies. The trouble with the latter argument is that I can't think of an oil-intensive technology that isn't well developped. >
Ashley, at the time, I could see the argument, but didn't conclude whether you were right or not. Now, I think that volatility is actually a negative for oil. That's because volatility introduces another cost for oil consumers; they have to be prepared to swing to something else when oil goes through the expensive times and switch back when it gets cheaper.
By using an energy supply which is more reliable, they avoid the switching costs. By buying futures contracts, they can continue operating during the times when oil would be cheaper. Enron was no doubt offering such futures contracts as part of their trading strategies.
Therefore, when somebody considers whether to buy oil-burning equipment, they'll be circumspect about temporarily low prices and unless they can be sure of avoiding the high prices, they are likely to decide to do something else with their money - such as buy a convenient coal mine, nuclear reactor, gas field, hydroelectric dam, photovoltaic array or insulation.
An oil-intensive technology which isn't well-developed is Orimulsion pdvsa.com Technologically it's fairly well developed, but from a market point of view it isn't. Venezuela is an OPEC state. Their huge bitumen reserves could increase their market share if prices get a bit higher...
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