Friday, March 16, 2007

Supply is more elastic in the long run 

Exxon is dropping an extra $20 billion a year to increase its oil production by one million barrels a day. Thomas P.M. Barnett notes that this is basic economics ... "[a]t least when governments aren't involved." The Saudis are saying the new equilibrium price is $50 a barrel, yet they forecast a drop in oil production for their country. Is supply running out, or is it responding to higher prices? Don't expect me to answer that; I just ask the questions here.