The Oil Market and Economics 101
Article from: OGEL 4 (2006), in Global Oil Markets: A Strategic Interpretation
Introduction
I am writing this article out of frustration. How can I explain to my students the statements of OPEC oil ministers, energy officials in the oil consuming countries, petroleum analysts, commentators, and journalists that contradict the principles of economics? First, "high" oil prices are not the result of "imbalance" between the supply of oil and the demand for oil. If we have a shortage, shouldn't prices go even higher until the supply and demand are "balanced"? Isn't the high price in this case the result of market equilibrium? If ...