Originally Posted by TEX
I see that the price of oil went up a bit overnight and the price of gasoline immediately followed. Up a few cents from yesterday, which is up a few cents from the day before. And up about .10 cents since last week. I was wondering how come when the price of oil falls, it takes awhile for the price of gasoline to fall? A local TV station in Houston did a story on this and reported that the price of the gas at the station has already been paid for so when the price of oil falls, the savings at the pump is not reflected until the supply on hand is expired. Why isn't that the case in reverse?
The world is about to hit 7 billion people. Many of those people (India & China) want lifestyles that mimic the west. Further, those of us in the west either want to grow or at least continue our present lifestyle. To do this we all need a lot of energy. The amount of oil produced worldwide hasn't risen enough to meet the pressures of more demand - thus an overall upward trend in price - especially since 2000. Of course 2008 derailed the upward climb for a short time, but even the great recession cannot keep oil price down for too long. It is pretty inelastic.
Further, new oil reserves are becoming much more difficult to harvest, thus the price must rise to reflect the energy used to retrieve the oil.
When I was born there were somewhere between 2-3 billion on the planet. Today there is 7 - in 20-30 years there will be 9 billion.
It's called overshoot.
Oil isn't the only thing that is going to become quite scarce.