| Oil price and trust | |
| [en] Scribbles | economics, politics, world, nov 10, 2008 |
Six months after oil could do nothing but go up (US$147), it's down to less then half its peak price (US$60). Which is great news for everybody. But it makes me wonder.
What makes this so much more interesting, is that it is oil. Oil is the driving force behind our modern world etc etc... But it is the ultimate commodity in that it is COMMON. Everybody needs oil and It doesn't matter where you get it, it's all the same, and given some refining process, it's all usable for the same.
So, if it is so ubiquitous and necessary, what or who can have the impact that the price of it doubles and then halfs in one year's time? The Chinese? Nop.. since they are still growing at 10% and still the price has halfed. Is it the Arabs? No they are not, since now they are cutting production and the price is still falling. So what sets the price? Yes... you are right... "the market"... Some abstract and theorectical place where buyers and sellers come and decide what the proper price is.
Okay, so it seems the market is convinced that the price of oil is inelastic (people will basicly pay anything for oil). But on the other hand, in the half year of expensive oil all kinds of alternatives were start into mocion. Showing that in the short term, sure, it's inelastic but in the longer term alternatives are being sought and available.
But for the moment the Oil price has impact on the price of everything else, from manufacturing of goods, house heating, and prices of staple foodstuffs. Some estimates are that between 70 and 90% of the cost of food is in Oil. An uncontrolled rise in the price of Oil kills people... literally.
If it is so important, we (the people of the world) can not afford it's price to be governt by something that has shown to be so frickle as the international market. We should know that we are paying the price that reflects the real costs of the product? And not some artifically inflated (or deflated) price which seems to be a sistem without links to reality.
Just for the record, I'm infavor of expensive oil, to make the world kick the habit, we should factor in the price of capturing the CO2 burning fosil fules.
