Quote:
Originally Posted by a_Username
The first bold is, as I have no idea how else to put it lightly, completely ignorant of capitalism. For any good (including labor), its price is determined by supply and demand. Supply is for the most part determined by production; demand is determined by the wants of different consumers. Ultimately, the consumer is the one who is in control of the allocation of resources. Also, the sentence following the first bolded sentence is very curious to me. You later state that speculators are the main reason for the increase/decrease of the price of oil per barrel, but you state that they do not "arbitrarily raise prices." The following person explains it better than me...
The second bold is contradictory. Their production costs and desire to maximize profits influences supply which in turn influences prices.
My reply to DG would suffice here. Speculation takes place in every industry, every day, and every hour. It's nothing more than a misunderstood term that is thrown out by political officials to place blame on anything but themselves. Another point that both of you overlook is you're looking at oil prices in the nominal. The price of oil, as the graph I've sent to both Dragoneye and DG would support, shows how the real prices of oil would remain stable (most likely decreased over time) if not for government interference. Real prices are the ones that mainly matter to economists, considering they take into account the inflation rate and the predicted inflation rates for future products. The boom-bust or business cycle isn't an inherent instability of the market economy; this idea was put to rest (for the ones who have been predicting crash after crash) by the Austrians in the '30s.
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Your government "interference" is a horrendous use of the term, as it implies an active intent to control the price, and not global geo-political events
As for oil being determined by supply and demand, please use that to explain the meteoric rise in 2007-2008, and then the even faster decline in the fall of 2008.