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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: TigerPaw who wrote (188996)	5/21/2004 3:44:19 PM
From: TimF	Read Replies (1) \| Respond to of 1577031

I think you misunderstand my position. I don't predict that demand is or will or would be down. I also am not asserting that the only or even the main problem is a lack of refinery capacity. If prices go up it does exert a downward pressure on demand, but other factors can cause demand to continue to grow. Also gasoline and oil demand are relatively inelastic in the short run. If the price changes demand doesn't change much. If the price of gasoline doubled tomorrow, I'd still have to fill my care up to go to work. If the price change is large (in real terms) and continues for a long time then the demand is more likely to adjust. If after doubling the price even continues to grow I wouldn't buy the Z or RX-8 that I've been thinking about for the last couple of years, I might go for an "econobox", maybe even a hybrid. Other people might decide to pay more for their house to reduce their commute, more people would tele-commute, industry would invest more in reducing energy use or in alternative energy sources ect. None of these changes overnight. The real demand is world wide. If the US demands a lot less oil, but demand in places like China and India grows as their economies develop then overall demand can still be up even with sustained higher real prices. If the real price increase is large enough then the reduction in the world economy combined with the incentive to find alternatives will contain or even reduce demand but that might require very high prices to be sustained for a long time. Tim

To: TigerPaw who wrote (188996)	5/21/2004 7:44:58 PM
From: tejek	Read Replies (1) \| Respond to of 1577031

Then you would predict that demand should be down. That is not the case either. There sure aren't less cars in font of me on my commute, and they aren't driving smaller SUVs. No supply shortage - No drop in demand. Short term, gas experiences inelastic demand even as gas prices go up......demand remains fairly stable.....and there is usually some shortages [although slight] which is what is forcing prices up. Over the longer term, gas demand becomes more elastic as people find reasonable alternatives, and demand and prices fall. Its at this point that surpluses develop. ted