Gas Prices, Gas Gouging, Peak Oil, Elasticity, Supply Demand

Gasoline gas prices are based on oil prices. Oil prices are determined by the oil supply and oil demand. Right now, both oil supply and oil demand are almost inelastic. As gasoline gas and oil prices go up, the demand stays almost the same. As the oil supply reaches peak oil or maximum production or extraction, the demand curve becomes vertical, or inelastic. The inelasticity of the oil supply and oil demand set things up for price volatility of both oil and gasoline. The seasonal changes in gas and oil prices we've seen in the last three years is probably due to reaching peak oil. This short screencast shows an inelastic oil supply curve, as well as an inelastic oil demand curve, and what happens to prices as the oil supply or oil demand change.

Category:

News & Politics

Tags:

• gas
• gasoline
• price
• prices
• gasprices
• peak
• oil
• peakoil
• gouging
• gasgouging
• elasticity
• inelasticity
• supply
• demand
• inflation

[jpcash11]

Amazing. This guy predicted what was going to happen a year before it happened.

[newculture]

Not exactly. I basically knew that it was going to happen, but didn't expect it to happen so soon. I didn't realize the financial system had become so fragile, or that it was that close to collapse.

Additionally, the above presumes that the demand will eventually stabilize and recover, but a total collapse of the global economy would prevent that, and we may already be in a self-reinforcing downward spiral.

Time will tell.

[gazzyjeanne]

Nice presentation. There was a link to it in an article posted on "theoildrumm" this week, which you might find informative.

You could have titled your video "Why the depression will never end."

[newculture]

Thanks, I wrote a piece on my LiveJournal a week or so ago which had a very similar title, "Why this recession may never end."

I'll look up the Oil Drum article.

[lorax2013]

Very prescient - I'll bet T. Boone wishes you had been advising him.

[newculture]

Probably not. Just because I understand the supply and demand situation doesn't mean I fully understand the interactions with the economy. I was in basically the same position Pickens was in when the price began to fall.

The amount of supply, and the long term decline of supply, is much easier to predict than when the demand will fall.

It would be worthwhile to make a similar video which illustrated what specifically happened in 2008, including the collapse of the economic system.

[FlawdaFootball]

2008 - financial implosion, oil hits $147 a barrel. Then from the later part of 2009 to early 2011, a moderate recover, oil goes back down to $80-something a barrel. Now as I write this in August 2011, the economy seems to be back in free fall. Sounds exactly like this video, which means it is likely that we are near or already passed global peak oil

[Stan1208]

Very true

[obliviontides]

whoa! Thats a freaking simple way of oil demand! Thanks! I need it for my report on oil for science! Thanks bro!

[polyzygote]

we are living in the dark ages. watch the BBC documentary 'a farm for the future' to understand why.

pay particular attention to when they mention crop yields of permaculture farming (hint, they are high, especially when in the light of it's energy input which is close to 0). there is a possible future for humankind but it will require a massive cultural shift. the documentary is on google video in full. good luck

[jamiefxd]

If oil is money, the economy is based on money, so the economy is in fact oil.

So if oil has peaked ( do your homework )

then the economy has also peaked meaning we are now in a downward spiralling economy going down with the rapidly depleting oil reserves . Where to now ? Seems ironic now to point out how ancient people worshipped the sun. Could it be time to look up or is it TOO LATE !!!

[mikedilger]

Good use of supply and demand curves. The market will always be volatile. Prisoner's dilemma type games make it inevitable that producers will oversupply, crash, then undersupply, and the price will always yo-yo. But the idea expressed in comments that mankind is on a permanent downhill is ludicrous. Many other sources of energy present themselves and have not been exhausted.