For Oil, Is There Any Going Back?
The oil industry is tossing around a rather sinister-sounding economic term: “Demand destruction.”
Demand destruction occurs when the price of a commodity is comprehensively viewed as too high and demand for the commodity begins to tank.
Hmm, I wonder why the oil industry would be worried about this. The fact is, since the $4-plus price spikes of this summer, demand has remained low. Americans have virtually stopped buying low-mileage cars and given up completely on gas-guzzlers, even now that oil prices are falling again. We’re still driving less, even as the price of gas declines.
Whatever the cause of this summer’s spike (blame continues to be indiscriminately doled out to speculators, increased demand from developing countries, hurricanes, and greedy oil barons), it appears there’s no going back. The surest sign of demand destruction is automakers’ shift to more fuel-efficient vehicles.
It just may be that the world’s most oil-hungry country has finally had enough … or perhaps the oil industry and OPEC are driving prices back down as fast as possible, hoping for one last hurrah.
