total miles driven down

The Goldman Sachs oil analyst had a good question last year. What is the top price for oil? The last dollar that starts to materially destroy demand. Up until dec. 07, no demand had been destroyed at all. Now it seems that the run from $100 crude to $140 crude in the last quarter has started to destroy demand. But prices keep rising due to fears of shortages ala Iran, etc. I do not believe this market is responding to supply demand issues anymore. It is scarcity pricing. In scarcity pricing if you hold a very scarce resource, the price of it is whatever anyone will pay. Not enough demand has been destroyed. And even if demand is destroyed, the remaining oil stays finite. The owners of that will know that prices will be higher if they don’t sell now. If it goes down, they wait and it will go back up. I contend that prices will be fairly unresponsive to demand destruction until it destroys over 20M barrels a day of demand. Goldman only estimates 5M has been destroyed. Morgan hasn’t put a number on it yet I don’t think.