The Real Power of Supply and Demand

My hobby has become the study of global economy. I watch currencies like a hawk, because Richard does intraday trading on the FOREX market, and am fascinated. When I was taking economics in college, why did no professor really show you how a market works, how all these bits and pieces tie in to strengthen or weaken currencies. Maybe that came in later but I was so bored with Econ-101 I thought my eyeballs would fall out of my head. The one lesson I recall is the law of supply and demand. In a perfect market, the supply of a product goes up when the price grows beyond equilibruim, this means your demand is shifting downward.

Over the past several months, we have all watched in disbelief as the demand for the dollar has been regarded as the red-headed step child of the global markets. Low dollar meant skyrocketing oil prices, of course inflation. The standard of measure for oil is the dollar, if the dollar goes down, oil producers have to raise prices to make a lousy buck. I mean come on what else would you have them do! What the oil producers forgot about were their customers, those of us that own cars and drive and fly away for lovely summer vacations.

Guess what you the consumer did! You drove down the price of oil by cutting consumption. That is an amazing effort, especially in the States where public transport is sketchy in most places. The price of oil has dropped from an all time high of $147.27 a barrel in July to almost $108 a barrel today. That my friends is a real lesson in supply and demand now the oil producers are listening, I think.

Well, this is what Market News had to say about oil, you will all be very interested, even though this is a boring subject, this is your real money after all!


OPEC meets on Sept. 9, with some expectations the cartel may opt to
cut oil prices to prevent a build-up of surplus stocks that could deepen
the slump slump in prices, which have fallen sharply from a July record
high of $147.27 a barrel.

Iran has said the producer group may need to cut oil supplies by as
much as 1.5 million barrels per day, or nearly 5%, to balance global
markets by early next year.

The U.S. government inventory data also showed total demand for oil
products, such as gasoline and distillates, over the past four weeks,
fell 3.5% from a year ago, continuing a trend of weak consumption in the
midst of an economic downturn.

Okay, okay, so we aren´t out of the woods yet, but look at the statistic out of Iran, they will have to cut oil production by up to 1.5 million a day. That is crazy and amazing. Look how much gasoline consumption has gown daown from one year ago, 3.5% may not sound like enough but that´s a start. Times are tough and we are finally exercising our rights via our wallets to say "Enough already, you are flippin´ bankrupting me to go to the grocery store." We are still worth something people and it makes me proud.