This Week in Petroleum for February 23, 2006 has a couple of reasons why the price of oil remains relatively high. The primary reason is fairly obvious to me: "the lack of spare capacity throughout the supply chain." The second is: "the market is in contango, which is defined as a market in which prices for commodities delivered in future months are increasingly higher than for those delivered in months closer to the present."
Their concise explanation of these two factors is worth a read.
Technorati tags: oil, energy, technology
I've recently read "A Thousand Barrels a Second" by Peter Tertzakian. Great book.
He makes an anology, starting with our memories of the 70's and 80's fuel crisises. He reminds us that people were so worried about future supplies that they would get in line with 3/4s of a tank. The hording througout the system confounded the problem.
He goes on to say that whenever there is "oil trouble" commercial users of oil respond the same way ...
It makes me think that maybe we've had a continuing stream of bad news and that has kept people buying. Not enough buyers have backed off, to let prices fall.
Posted by: odograph | February 24, 2006 at 09:17 AM