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To: cosmicforce who wrote (14543)12/9/2004 4:55:27 AM
From: Raymond Duray  Read Replies (1) of 20773
 
Re: Most commodity prices would WAY MORE than double with a double in demand.

Your comments are interesting and useful.

I've watched the crude oil market for a couple of decades now and I've developed a rough rule of thumb on the market. Broadly, as supply/demand imbalances occur, a 1% deviation of the supply of crude oil from the demand for same in the global market results in about an $8/bbl swing in the price of crude.

This was more true until 2002 when the market realized that Alan Greenspan was destroying the dollar and responded by upping the $/bbl volatility accordingly.

Basically, what I'm trying to indicate is that while demand is relatively inelastic, supply has been in a steady decline vis a vis demand since the peak year of 1972 and the volatility associated with supply/demand imbalances can only be expected to rise now that the shut-in capacity of the world's crude oil production industry has shrunk from a high of 25% in 1972 to a very disturbing 1% today.
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