Wandering Into Wisdom

This blog chronicles the knowledge, insight and wisdom I encounter every day as a leadership consultant, executive coach, educator, father, friend and citizen. This site is dedicated to my father, Louis (Jack) Laughlin, who passed on to me an appreciation for wisdom. A special thanks to my friend Isaac Cheifetz, a businessman and journalist, who helped me understand the value of blogs and encouraged me to write one.

It's Marginal*

I paid significantly less for gas yesterday than I did a few months ago. About 60% less. Let’s take a look at what’s driving such a dramatic change. Supply and Demand – The shrinking world economy has caused the demand for oil to decrease while production capacity remains unchanged. Price Elasticity – Oil prices are relatively inelastic in the short term so we don’t buy more oil simply because it’s cheaper, which keeps demand low. Marginality – Although the consumption of oil has only declined a couple percentage points the price has decreased about 60%. It’s a difficult concept to grasp. Think of a freeway that becomes a parking lot at 99% capacity but allows traffic to flow sixty miles an hour at 95% capacity. So what about the future? Experts all agree that we have used about half of the world’s oil reserves so prices will increase dramatically in the long term. Better buy that hybrid after all. See update for this post titled Will It Never End.

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