Lox wrote:Yeah, the whole "shortage creates demand" idea doesn't really make sense to me as well, based on what I remember from my economics courses in college.
Oh, Nintendo worked that back in the 80's like Ish on Lotus. They would purposely limit the number of games available (they kept it down to 5 per publisher per year, which is why Konami created "Ultra" and released Metal Gear and other titles under this brand) and the number of system available in stores to purposely increase the equilibrium price by having demand outweight supply. Hence, they were, back then, able to sell carts for $70 Cdn, which is more than the standard price for GC games. That's the equivalent of what, $110 today? I remember GLADLY paying $93 Cdn for FF3 when it came out on the SNES. If they ever tried to charge me that much today for a game without a super-duper special edition or a unique controller (Guitar Hero cost $85), I laugh at them. They made shitloads of money that way, until the Genesis came out and they actually had competition.
DeBeers is doing the same thing with diamonds. They actually have about 90% of the world's diamonds in a storage facility in Russia and work the whole supply vs demand thing. If anyone dares to try to undercut them, they flood the market with diamonds, make them cheap as hell, and wait for the other company to either run out of diamonds (usually they'd have just a mine or two) or money, which generally doesn't take long when your selling price is below your variable costs; and that's before you even start to try to repay the interest on your start-up capital.
Don't think oil is any different. There are tons of refineries running and far below maximum capacity or not at all. They're trying to stretch out their limited supply (what is it, 100 - 150 years or so they've got left at current consumption?) by providing JUST enough to meet the very basic demand but not the "let's go for a drive for fun" demand. Getting the hybrid cars out there and killing the electric car (there's a good documentary called "Who Killed The Electric Car?" that explains this; you can get the PBS special on this documentary from Torrentspy or Demonoid) is a perfect way of making their supply, and in turn, their profits, last that much longer while still keeping the demand for their product there. Of course, our utter reliance on plastics will also ensure they at least have a strong market (sometime, take a look around your house for the number of items that have plastic in them, it's shocking), even if other products which use petroleum die out.