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Gold/Mining/Energy : Oil & Gas Price Economics -- Ignore unavailable to you. Want to Upgrade?

To: jackie who wrote (174)	1/7/2000 9:48:00 PM
From: Ed Ajootian	Read Replies (2) \| Respond to of 350

Jackie, You seem like a bright guy. Hopefully more "economics-literate" than myself. I would like to know why prices of a commodity would go up 35% as a result of reducing the supply of that commodity by 13%. Query why the supply/demand curve isn't more linear? See article below: Analysis - Oil price falls, good news for OPEC By KERM YERMAN Oil's New Year price slide appears to have lifted the pressure on OPEC producers to consider an early move to ease export limits before they expire in March. The Organisation of the Petroleum Exporting Countries faced calls in December to reduce prices from nine-year highs by releasing extra supply to refiners worldwide. With benchmark Brent crude now $2 a barrel below a $26 mid-December peak, leading OPEC policy makers Saudi Arabia, Venezuela and their ally non-OPEC Mexico now have breathing space to consider the next options for export policy. ``They appear to have avoided that bullet for the moment,' said Peter Gignoux, head of the energy desk at Salomon Smith Barney. OPEC is celebrating a rebound in oil prices which carried Brent on average last year to $18 a barrel from just $13.30 in 1998. By withholding some 13 percent of supply, nearly four million barrels a day, 10 members of OPEC engineered a 35 percent price rise. Producers are agreed on the need not to spoil the party by reintroducing too much oil too soon. But they have yet to decide whether to increase export flows in April, after their year-long agreement expires, or keep standing restrictions in place for a few more months. OPEC's price hawks, led by Kuwait and Iran, would prefer to maintain output quotas unchanged until June or September.