Rumor has it the oil companies are slowing the rise at the pump to help Bush's re-election. So I wonder...if gas at $28 ppb was $1.73 why am I paying $2.18 when the ppb is at $55?
> I remain agnostic on the 'oil bubble' question, but there are some real
> supply constraints, and demand has run well ahead of projections (not
> least from China, although I don't want to over-egg the 'China is
> behind everything' point).
>
> Part of the reason for supply shortage has been that the oil majors
> have used a very conservative oil price in their financial models to
> assess investments, so investment has been curtailed. There has been
> a bit of a cartel in oil price prediction, too. Most of the major
> banks were forecasting prices in the mid-$20s not long ago - all using
> very similar models. For summary, see:
> http://www.rbs.co.uk/Group_Information/RBS_and_the_Economy/Surveys/downloads/oil
> price.pdf
>
> Problem is, there's not enough of a cartel, so no one can make long
> term plans based on supplying aggregate future demand. Instead,
> everyone uses the same financial models, which work just fine for as
> long as the future behaves like the past...
>
> James Greenstein
>
>