On Fri, 23 May 2008, Wojtek Sokolowski wrote:
> By the same logic, fixing oil prices - even under
> "peak oil" condition, makes sense, becaouse it buys
> time and allows more smooth transition to alternative
> energy sources, no?
Sure -- but that's what futures markets are for. And in oil, that's what you'd use. Futures give you all the advantages of long-term delivery contracts (locking in the long term price) with much, much less of the downside, in that they are easy to get out of if you see you guessed wrong.
I probably should have made clear that although I'm using the oil market in 1979 as a model, it's because that market was relatively underdeveloped then, and displayed different dynamics than it does now when the spot and future markets are huge and liquid and govern virtually all private contracts. The commodities I'm actually interested in are basically everything except oil, and especially grains. I'm suggesting that those markets might exhibit these dynamics precisely because they are less developed -- because they are at relatively the same state of development as oil was in 1979, where the spot market was a lake in a larger ocean of supply and demand, and was determined by that larger ocean, rather than the other way round.
Michael