A Supply Side Problem: Oil's High Price Is Here to Stay

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...The argument is that no matter the size of the US recession, no matter the short term infrastructure on conservation measures, no matter the lower discretionary demand for oil may be, the higher demand for the inelastic demand for oil, especially in the emerging economies, will lead to higher prices of oil. The high price of oil is here to stay. Frank J. Maura

...The fallacy is that a mild to moderate recession in the United States will lead to lower oil demand and thus a drop in oil prices. This is a short-term projection. Even with lower demand in the United States, the growing markets hungry for oil such as China and India will put constraints on supply in the future. Keep in mind that to a degree oil is inelastic. There is only so much lower demand that even a recession can bear. Companies still have to get their goods to their ports. People still have to go to work.

So what is the argument? The argument is that no matter the size of the US recession, no matter the short term infrastructure on conservation measures, no matter the lower discretionary demand for oil may be, the higher demand for the inelastic demand for oil, especially in the emerging economies, will lead to higher prices of oil. The high price of oil is here to stay.

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