High oil prices tend to trigger a so-called “neighborhood effect” where selected manufacturing businesses that are located closer to their customers get a price advantage over competitors that are located far away. That is because local businesses have lower transportation costs than their out of town, or out of country, competitors. [read full story]
Despite the quick run up in gasoline prices, the U.S. economy isn’t about to be eaten by the inflation monster. While it is a good bet that sometime in the next few years the Fed will have to deal with rising inflation, now isn’t the time to change monetary policy in an effort to slay […] [read full story]
On Monday the Wall Street Journal ran an article that described the end of the golden era for oil refiners. It is a great article that, unfortunately, was published many years too late to be considered news. Just as gravity is a force that brings all objects to earth, public policy that destroys the demand […] [read full story]
Last week I published a blog article that discussed energy policy and suggested that an effective energy policy requires federally established minimum oil prices. Low and volatile oil prices destroy private investment in energy projects because returns become too uncertain to attract financing. As oil trades between $40 and $50 per barrel investment capacity for […] [read full story]
President Elect Obama nominated his energy team yesterday and emphasized that energy policy is a national priority. Every President since Jimmy Carter has talked about U.S. energy independence, but no President has actually broken the U.S. addiction to imported oil. In the 1970s, I studied energy economics and policy and learned that mandates, slogans and “feel […] [read full story]
Deflation hurts the economy like hydrochloric acid burns through steel. Falling prices destroy corporate and household balance sheets and make it impossible for the financial sector to function normally. Demand is destroyed by deflation which in turn leads to more deflation. The weakest sectors are hurt first, but deflation quickly burns through healthy industries. This […] [read full story]
Today Congress announced a great breakthrough that explains the cause of high oil prices. The cure for the energy crises is now known and simple legislation will cut gas prices, help the economy and raise living standards. MarketWatch’s headline said it all: “Gas could fall to $2 if Congress acts….Limiting speculation would push prices to fundamental […] [read full story]
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