A 50% price decline doesn't imply there's 50% less demand for petroleum. If 6% less demand is all the margin consumers need to get their supply, then price can drop quickly. It's all in the margins.
A 50% price decline doesn't imply there's 50% less demand for petroleum. If 6% less demand is all the margin consumers need to get their supply, then price can drop quickly. It's all in the margins.
What is the best way to learn more about this, are there any examples? This seems a bit counterintuitive to me.
There is a (IMHO) good explanation at https://www.next-kraftwerke.com/knowledge/what-does-merit-or...
Keyterms: "marginal cost", "merit order", "market-clearing price".
Not fully sure this is that, but it reminds me of something an American friend explained about their business under the Trump regime (as a rant about how laypeople were deeply under-reacting to the tourism decline):
If it takes 100 tourists to pay his bills, taxes, staffing, and other expenses for the day, the next 5 tourists represent the profit. A tourism decline of 10% doesn’t mean 10% less profit, it means the catastrophic inviability of the whole business as it’s currently structured.
That assumes he has a fixed profit per person.
In reality most business can do things like cut hours for staff, postpone upgrades or long term maintenance, cut amenities, raise prices etc…
If most businesses were structured in a way that a 10% decline in customers immediately puts them out of business, any economic downturn would be an unrecoverable positive feedback loop for the economy.
its simple demand and supply if you have 100 buyers for 99 the price will shoot up but if you have 100 seller and 99 buyers sellers will drop price so. Previously gas turbines were charging through the nose when sudden demand spikes but now batteries are competing with them and pricing them out
This sounds like Price elasticity of demand which is a measure of how sensitive the quantity demanded is to its price.
https://en.wikipedia.org/wiki/Price_elasticity_of_demand