Victor Niederhoffer and Laurel Kenner: Daily Speculations

Victor Niederhoffer and Laurel Kenner: Daily Speculations: "Refinery Problems Help Crude Oil Prices? by Ross Miller

Back in the old days, when I used to take my dinosaur out for his walk, the wise old economists taught of something called 'derived demand.' For example, that component of crude oil demand that goes into refined product is not demanded directly; instead, its demand is derived from the demand for the refined product. Now if something creates a bottleneck in the refining process, supply of refined products will drop and so their price will increase. Similarly, the bottleneck will cause a drop in demand of the raw input (crude oil) and its price will decrease. Of course, in a manipulated market in which the participants (and certainly none of the financial journalists) do not know economics, it is possible for the price of the raw good to go up, but only temporarily."