Thursday, 19 November 2009

Supply and demand or what?

This report from Reuters is of comments about oil prices made by energy consultant Daniel Yergin recently in Singapore:
"Oil prices today do not reflect the world's supply and demand fundamentals. Instead, prices are reflective of the weak dollar and expectations of a strong economic recovery," Yergin told reporters on the sidelines of a conference.
This seems odd to me. Isn't it true that all that is being said here is that expectations matter? It isn't supply and demand that's important, rather its expectations about supply and demand that matters. But don't the ideas of supply and demand today embed expectations about the future, so what Yergin is saying is that it isn't supply and demand that matter, its ... well ... supply and demand that matters.

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