Definition of shortage

_sluimers_ · Tar Sands Joined: Jul 07, 2004 Posts: 68

I'm not quite sure wether I've read it right, but it seem to me that some posters and people who write articles for electronic newspapers or are being interviewed in articles, claim that there's never going to be an oil crisis for this reason:

"The demand is not higher than production. There won't be a crisis. There won't be a shortage. This is simply a demand issue. And when he demand is higher than production ,only the price will go up."

So let's say for example, a mega destructive hurricane swoops all over the world. Luckily it only succeeds to destroy every single oil rig and well on the planet. World oil production has come to a halt. Since the arrival of the all-destructive hurricane was well known in advance, the price of a barrel per was already a zillion bucks per barrel, before the hurricane arrrived. That way, there never really was an oil shortage, it's simply demand that has gone down.

Now, this scenario is of course impossile, but if I come with a less exagerrated problem and a much more realistic one, would that count as an oil shortage?
What exactly does and doesn't count as an oil shortage?

marek · Posted: Sun Dec 05, 2004 7:34 am Post subject:

That is an economic definition of a shortage. Since demand is willingness and ability to pay, if the price of oil goes to a zillion bucks per barrel, demand will be destroyed through the "ability to pay" channel, and thus demand will meet supply. The problem is that this does not change the fact that people are still in need of oil, so in terms of need there is a shortage even if the market clears in an economic sense.