Thursday, August 5, 2010

The Price of Oil: Not as Simple as You Think

The Oil Drum has an article by George Mobus, an Associate Professor of Computing and Software Systems at the University of Washington, Tacoma: Peak Oil: How Supply Crunch Can Lead to Lower Prices (for a while!)

His model of the price of oil proposes models of the production, consumption and price of oil over multiple time scales and including multiple feed-back loops. In short, his model explains the non-linearity of the oil market, which mimics similar cycles in biological systems (aka, Panarchy, although he doesn't call it that). His model explains how oil prices fluctuate and, at short time scales, don't necessarily reflect current or future supply, although in longer time scales, the price of oil is generally trending upwards. The full model is represented below:

1 comment:

  1. The link in the post didn't work for me. Here's a link to a pdf of the article: