RE:RE:RE:RE:RE:The US may cut after allTo understand global production/consumption paradigms, we have first to consider how different producer and consumer interests are. To simplify (and abbreviate) the discussion, we will consider the situation in the U.S. only. American producers seek only to maximize profit, meaning that, so long as there is a net profit to be made on every barrel of oil produced,
they will maximize production. That is why U.S. production (pre-pandemic) hit 13.1 million barrels per day. The lifting of multi-decade export restrictions facilitated the process. U.S. consumers, on the other hand, wish to pay the lowest possible price, but because their demand is relatively constant (a matter of price elasticity and the topic of another discussion),
they will pay whatever the market rate is. There is
absolutely no connection between production and consumption in the U.S., since any discrepancy between demand and supply is met by production outside of the U.S. to the extent domestic production is insufficient to meet consumer demand, and exports if production is excessive. These factors govern decision-making by producers and consumers in the U.S., subject to government decree or extraordinary circumstances such as the coronavirus (COVID-19) pandemic. Government decree enters the equation during extraordinary times such as currently experienced only for political reasons. There is no economc rationale for interference, if all interests (producers
and consumers) are considered.
JohnFriesen wrote: oexel wrote:
Shutting in when you can buy product cheaper than you can produce it is the free market, and correct way to resolve an oversupply.
If it were that simple, the US wouldn't produce any oil at all.
It is complicated, but the one obvious thing is; the US has to join in with the rest of the planet, and cut production, and do it now, and not this "it will fall on its own" b u l l s h i t