Saturday, January 20, 2007

Prices Go Up Demand Falls

Imagine the surprise when the most basic of economic forces takes place. The Associated Press's Dan Caterinicchia registers such surprise when demand for oil dipped in 2006 below levels in 2004. Of course global demand was still higher driven by China and the Middle East. What drove the US decline:
In the U.S. — still the world's largest energy consuming nation — residual fuel oil deliveries experienced the steepest decline, falling nearly 27 percent to 673,000 barrels per day as industrial and electric utility facilities made major shifts to natural gas, the report said. Jet fuel demand declined by 2.8 percent to 1.6 million barrels a day.
In other words, flexible industries adjusted their demand as a result of price increases. What could be more basic than that?

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