In real terms they haven't lowered their prices. If they had charged the same in dollars, after the dollar had appreciated, they would have in effect been charging their customers more as the dollar is now worth more. By lowering the dollar price, they keep their actual price the same as the dollar is now worth more.

You are assuming that demand is constant, but oil can be replaced by other sources of energy. Whith a high price of the oil there are electricity generatora that do not profit, so they don't generate energy, leaving space for other cheaper sources.

Also, it is arguable that other costs, such as car gas rises, some people will use public transportation. This sustitution effect can be applied to many other examples.

The example assumes that all other factors (like demand) remain constant. You are correct in saying that a higher oil price will lead some users to switch to a different energy source in some scenarios. The point is to explain why financial commentators say (especially recently) that "the strong US dollar is causing commodities to sell off."

> Oil isn't like electricity which is wasted if not supplied.

To a first approximation, yes, it is.

Oil is very expensive to store, and the flow of most wheels can't change on short notice. Over a long time, production does change following price fluctuations, but in short times, it does not.

Correct. And the USA has a multi billion $$ storage project for oil t

https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(U...

That's specifically for defense purposes. A lot of crude is sitting in oil tankers off the coast of Houston waiting for oil prices to increase before delivering.