Whistling in The Dark– The New ‘Relaxed Attitude’ on High Oil prices - by Andrew McKillop
Plenty of thorough and serious studies by economists in fact show that real energy prices are still about 25% below those of 1980 in most OECD countries, when compared to real earnings and the purchasing weight of each item – from energy to rent and food – in average persons’s budgets. If that seems amazing, step outside in any big city of the Global Economy world, and count the 2-ton, 500 HP 4WDs you can see in 10 minutes, or run a quick check on airplane traffic or container shipping growth rates. The real wage effect explains this: even at today's nominal record prices, oil consumers in the OECD countries spend less than 5% of their disposable incomes at the pump, against nearly 7% in 1980.
The world economy has managed, with some indigestion, to swallow the rise of oil prices past $80 a barrel. How well could it survive $100 a barrel? The answer is quite well -- so long as several conditions still hold true. The price rise would probably have to be gradual. Inflation couldn't get so bad as to force big interest-rate hikes. Oil-rich nations would need to pump their profits back into U.S. and European economies. All of this has happened so far. The happy confluence may continue, though fears remain strong that high energy prices will tip the U.S.into recession.
A host of factors, including tight oil supplies and a weak U.S. dollar, suggest that oil prices have further to rise. Some analysts continue to believe that oil is destined to reach an all-time high, as measured in today's dollars, of more than $101 a barrel.
No comments:
Post a Comment