As a consequence, suppliers now want to supply more and consumers want to consume less.
Suppliers want to supply more. So, if you're some Saudi Arabian sheik witnessing these astronomical oil prices you really want increase oil production and supply more? What will that do to oil prices? Think about what you're saying.
Exactly. If I'm an owner of an oil field I prefer to sell at higher prices and if prices are high I invest more in exploration.
Of course prices are not just influenced by supply and demand. They are also influenced by speculation. I never denied that. What I'm saying is that speculation changes the timing and increases the volatility, but it cannot decouple from supply and demand indefinitely.
So if we're running out of easily accessible oil in, say 20 years, and speculation increases today's prices in expectation of that, that's a good thing. Of course it is a double edged sword. Sometimes future expectations never materialize and speculation ends up destroying value.
But that's not the cause of our higher prices. Listen, I can't keep arguing this. Do me a big favor and just read the first 3 paragraphs here:
http://useconomy.about.com/od/commoditiesmarketfaq/p/high_oi...
As a consequence, suppliers now want to supply more and consumers want to consume less.
Suppliers want to supply more. So, if you're some Saudi Arabian sheik witnessing these astronomical oil prices you really want increase oil production and supply more? What will that do to oil prices? Think about what you're saying.