The point of my post (more accurately, the linked post from last week) was that the drop in oil prices is more than simple supply and demand. That, coupled with this post about how distortion of pricing signals can completely screw up a market, and you get what I’m talking about.

There are so many outside forces driving the price of oil down that it’s bigger than a simple drop in economic activity. But producers are behaving like they would if it were a normal slowdown. We will have severe monetary inflation, and that coupled with supply destruction will cause much higher future prices of oil.

Let’s face it. Most oil producers are good at
a) analyzing future demand
b) scheduling projects in order to synchronize production to demand.

The notion that they won’t invest in future production out of a short sighted assumption that present demand = future demand is pretty inaccurate.