[QUOTE=Fuchs;115081]The very question already shows that you have no clue about economic theory. The correct question would have asked for the price elasticity of demand for oil. That's 1st or 2nd semester microeconomics.

Let’s go to 3rd semester economics. But before we get there we will talk about externalities, then we can talk about oligopolies. In each case where energy prices increased "wildly" relative to a gradual free-market price increase (price increase because of supply and demand, and price inelasticity), price volatility was caused by a market externality. In 1973, Oil Embargo, in 81, deregulation of energy, in 95-00 (consolidation of marketers) Enron index manipulation, in 2006,7,8 manipulation by commodity speculation.

The ability of this to happen is because of the relative perceived inelasticity of energy. Everything in life has an energy component and if you were to add up the real cost of energy in a delivered commodity and life, you would see what the true impact of volatile energy prices have on an economy. And, because of the relative inelasticity of energy the externalities induce the price swings.

But there are forces greater than the inelasticity of energy. In reality although less elastic than other commodities, load destruction will occurs when a commodity price becomes unstable and overal demand will drop regardless of the perceived inelasticity. We saw this occur in the early 2002/05s within the natural gas industry after Enron. Larger industrial users will switch or discontinue their processes, or close down, or move off shore to lower cost of production areas--they in essence switch (oil fired to coal, natural gas to nuclear, gasoline to natural gas vehicles, etc.) and load distruction (reduced demand) will occur regardless of the elasticity profile.

The primary cause of "wild" price swings in energy has less to do with elasticity and everything to do with a concept known as Oligopoly Markets. These markets act more like Monopolies. Oligopolies have many suppliers (supply) and many end-use buyers (demand). But in between, unlike many other markets, they have few large aggregators, a limited number of refineries, and few marketers to end-use markets. Take Enron for example, they accounted for nearly 80% of the aggregation natural gas market until their demise. In energy, there are many producers--small, medium and very large but they feed their supply into a small number of refinery and/or marketers (the big supplier pipeline gets restricted before it goes to the big end-use demand) that feed the end-use market. These marketers control the major portion of energy that flows into commodity market hubs and the end-use market. This is why volatility of energy prices can swing more than 10% in a few weeks.

What will it take to wake us up to the ever-tightening grip of oligopolies over ever more of our global marketplaces? Even though their power manipulates and warps our production, and our free market system, no one sounds the alarm. Experts go back to their paradigm of supply, demand and price. But and oligopoly market warps the Keynesian model paradigm.

Oligopolies induced volatility and the collapsed of our economy in 2008 did not set off any bells. Nor did the revelation come to the experts addressing the economic collapse. They blamed financial, housing, auto and lending, and anything else they could point at that fit the paradigm. In oil 10 groups account for 90% of all WW retail down-stream sales, with single aggregating companies often capturing more than 75 per cent of particular energy markets. These markets will not act according to second semester economics and our economy will not improve until we control energy prices by control the oligopolies behind it.