Tuesday, September 2, 2008

Oil is down $35, but it's still very expensive

This chart uses a semi-log scale for the y-axis, so the slope of the line is equivalent to the percentage change in the price of oil. Recent declines in oil prices have been impressive, and gasoline prices have come down about 50-75 cents as a result. But as the chart shows, oil could still be in a rising uptrend. I'm inclined, however, to think that the forces of supply and demand have finally kicked in. People are cutting back on their driving, and producers are stepping up production. Plus, politicians are becoming more receptive to allowing more drilling and exploration, and countries, like India and China, are shutting down programs which subsidized the price of petroleum products.

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