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Originally Posted by 82 GT
That only works in theory. People can't spend less on gas because we need it. Sure, we can cut back and consolidate our necessary trips to the stores and such but that wouldn't be enough to dramatically drop prices.
It's like asking smokers to quit buying cigaretts so that the price will drop......they can't...they need them...there're addicted.
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I disagree.
We are talking about the marginal buyer, not the masses. World oil demand since 1998 has gone up about 10%, while prices had gone from $10 to $70... valley to peak... a 600% increase.
We do not need 30% reduction... Energy numbers that came out in October (every Wednesday at 10:30 Eastern time), which have led to the pullback in oil from $70 to $60, showed a decrease in demand of less than 5%... that marginal buyer was the one that was the one driving that price higher, when they left, the price fell.
So yes, oil is an elastic commodity, though its elasticity is surely limited.