Saturday, March 5, 2011
Saudi just raised export prices after raising output...
Since the Saudis can't raise supply levels, based on the Wikileaks posts. Jim Rogers said much the same. The Saudis, in a panic, sought the wise counsel of their resident economists.
The Saudi kings and princes climbed the mountain, (more of a steep hill in a nice neighborhood) where the economist made his home. It was guarded by fearsome beasts of a feline and canine nature which could only be subdued by the supply of delicious meaty treats. They called to the great and wise economist ringing the bell on his door. The wise one answered the door and they proclaimed "Great wise one what shall we do, we have no additional oil capacity!" The wise Austrian economist, invited them in and paced his living room floor for a moment, deep in thought, while stroking his long gray beard, his Starbucks coffee in his left hand, then suddenly he quickly shuffled to a cupboard and pulled out a dusty scroll. With a noisy flourish he unfurled it. He spoke to them slowly and softly with a crafty look in his eye, the light somewhat dim "This is the magical supply and demand curve" and winked. "It is the key to your quest." He advised them that they need only "raise prices" in order to create additional supply. The Saudi administrative accounting moles mouths dropped. With wide eyes and open mouths they praised the wise old economist and sprinted out of his well appointed house only to barely hear his then faint voice warning "but you cannot raise the price forever, because the substitutions and incentivising of conservation and alternative sources may come back to affect you with different demand dynamics over time", but the cacophony of yells of "yea" and "yes" drowned out the frail old bearded man.
They returned down the mountain running swiftly and proclaimed to the CNNs that they would raise supply by 5 Million barrels thusly calming the markets of the nervousness from the fall of totalitarian governments in the region. They raised the prices to Europe, since there was such a high percentage of tax costs in their per-litre price and thereby created additional "capacity". They then praised the economist and created a marble statue in his honor. And everyone lived happily ever after...or did they????!!!??