Haven't economists already stated that oil prices have exceeded market factors?

Question

Yes? So why, then, are people pissing-n-moaning over increased demand? I was telling someone recently that oil companies pinch supply to max profits on a dwindling resource. And she gave me some mess about Walmart.

Answer 1

That might have been an efficient thing to do if prices were low, but prices are so high that demand has fallen for oil for the first time since the second embargo in '79; the failure of a business tactic like that is falling demand. If they were doing it a few years ago, they're not doing it anymore.

Answer 2

First of all, you have to understand that economists don't agree on anything.  Put three economists in a room together and you will get five opinions.  It's not called 'the dismal science' for nothing.

People have this idea about supply and demand.  It works sometimes, but not other times.  If you look at oil over the last 50 years or so, you see that the times the oil companies make the biggest profits is when they have the least product to sell.  When there's a shortage their profits spike.  That's not supply and demand, it's quite the opposite.  Energy has never been a 'free market'.  And even less so now when 90% of it is controlled by four or five companies worldwide.

Oil has gone from $35 to $140 for no reason except (1) the possibility of a shortage sometime in the future and (2) the fact that the oil industry is able to set prices arbitrarily.  A barrel of oil costs no more to produce today than it did before the war.  There is obviously no shortage of it, not even an artificial shortage.

It isn't exactly a coincidence that the president, vice president, sec'y of state, sec'y of defense, and 30 or 40 other top people in the administration come out of the oil industry.

Answer 3

Yes clearly price gouging is going on, the obscene profits of the oil companies are plainly no accident. Add to that entities such as Opec, and I'd say consumers are getting f(_)cked repeatedly.