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 Post subject: Oil prices "will hit optimum level"
PostPosted: Wed Apr 22, 2015 3:56 pm 
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Joined: Fri Apr 04, 2008 10:45 am
Posts: 8193
Whatever that means.

I got a feeling they don't mean Pareto equilibrium, though that's the only sense of "optimal" that has any meaning for prices.


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 Post subject: Re: Oil prices "will hit optimum level"
PostPosted: Wed Apr 22, 2015 11:56 pm 
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Joined: Fri Apr 04, 2008 12:20 pm
Posts: 840
Location: Tantalizingly close to Colorado
Never heard the term before, but the general concept is considered in the oil industry. When the price of oil is too low, the overall economy may get some brief gains, but the lagging energy sector (and lack of investment in oil production) will eventually drag it down. If the price is too high, the overall economy stalls. Though the energy sector may benefit from the high prices initially, the overall demand will drop and drag the energy sector down as well. So there is an "optimum" price, one that allows the economy to grow and provides enough incentive for the oil companies to invest to increase production, but not at such a high rate as to cause a glut in the market. On a more basic level, high oil prices cause operating expenses to go through the roof (there are a lot of trucks driving around to operate and maintain the hundreds of thousands of wells out there.)

The Saudis know this quite well, and they have historically tried to herd the cats that make up OPEC to try to maintain this balance by moderating production.


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 Post subject: Re: Oil prices "will hit optimum level"
PostPosted: Thu Apr 23, 2015 1:01 am 
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Joined: Fri Apr 04, 2008 10:52 am
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Location: California-prev Texas Montreal Virginia
Huw does a Pareto equilibrium relate to an ordinary supply demand curve?

https://www.google.com/search?q=supply+ ... 20&bih=876

I will be having a knee replacement tomorrow. May be disposed for a few days.


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 Post subject: Re: Oil prices "will hit optimum level"
PostPosted: Thu Apr 23, 2015 11:45 am 
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Location: Toronto
Is that before or after the "carbon" tax?

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