Again we get another interesting tidbit of information from James Hamilton. This one deals with the claim by Woodward that the Saudis are behind the current price drop in oil (and hence gasoline) and that they did it for the sole reason to help out President Bush. I already pointed out that this type of story didn’t really work for 2004. And now Prof. Hamilton shows that it doesn’t work now either because — Are you ready? — Saudi oil production has been falling. So, if the argument is that the Saudis have been pumping oil like crazy to drop the price, uhhh how come the Saudis are cutting production?
Of course, this doesn’t stop the conspiracy theorists. The story is that the Saudis didn’t cut production fast enough. That is, by cutting production slowly the Saudis, in effect, put more oil on the market forcing the price down. But as Hamilton notes, if a bigger cut in production is necessary to keep the price from falling, then doesn’t this demonstrate that the drop in price is due to something other than what the Saudis are doing?
Now some might be going, “Huh?” at that last one, so let me explain. If a larger production cut would have been necessary to keep the price from falling, that implies that demand has decreased by more than the Saudis’ production indicates. That means that the price decrease is due to that decrease in demand.
Oh well, I’m sure this conspiracy will mutate yet again and in a few days it will be something else.
