Archive for ‘oil’

June 10, 2009

Economics: ‘The Current Weirdness’

In a private e-mail exchange, one very shrewd financial analyst used the phrase “the current weirdness” to describe the economic moment we’re in. “[T]he overall story in the media is wrong, which isn’t unusual,” said my correspondent. The problem is that our situation is so unprecedented, even the most astute observers are somewhat mystified.

What provoked the “current weirdness” remark was something I wrote about the possible influence of hidden inflation in the financial markets:

This chart, from CNN/Money, shows how crude oil prices have increased 49% since March. Interestingly enough, rising petroleum prices mirror a rise in the stock market during roughly the same period. The Dow Jones Industrial Average, which closed at 6,547.05 on March 9, closed Monday at 8,764.49 — a 34% increase.
If analysts worry that rising oil prices could jeopardize recovery, why would this spike in petroleum coincide with a rising stock market? One possibility: Inflation. . . .
The Dow gains of the past three months may also be a product of inflationary pressures — the price of stocks going up because the dollar is worth less. And maybe this explains those uncountable jobs “saved or created” while unemployment keeps going up.
Treasury Secretary Timothy Geithner says “the global storm is receding.” Expect a new storm if investors become convinced that inflation is fueling a Ponzi recovery.

Please read the whole thing. If even shrewd analysts are puzzled by “the current weirdness,” the rest of us need to be paying attention.

(Cross-posted at Right Wing News.)

UPDATE: When Von at Obsidian Wings talks about Obama’s deficits, note the reaction:

Other commentators argue directly or indirectly that Obama’s deficits don’t matter because Bush also ran deficits (albeit smaller ones). That’s illogical: two wrongs don’t make a right; if anything, Bush’s irresponsibility counsels for greater — not less — responsibility on the part of Obama. Attacks on me as a purported Bush supporter also don’t change the facts . . . They additionally overlook the fact that I never voted for Bush.

Allowing political beliefs to cloud your vision of economic reality is a major problem. Given my oft-stated belief that Obamanomics is doomed to failure — It Won’t Work, The Fundamentals Still Suck, Economics Is Not a Popularity Contest and we’re on The Road to Weimar America — I’m obviously inclined to believe that the light at the end of the tunnel is an oncoming train.

Nevertheless, while diligently auguring for auspices of doom in the economic entrails, I’m trying to check my pessimistic biases at the door and entertain the possibility — however remote — that the inherent dynamism of the American economy can overcome even the Keynes-on-steroids interventionist approach of Obama, Pelosi and Reid. We may yet muddle through somehow.

Conversely, idolators in the Obama temple cult viciously denounce heretics like Von. To disbelieve in the miraculous power of Hope, to doubt the unicorns-and-rainbows promises of painless Change, is to invite banishment to Outer Darkness. We recall the fate of Soviet scientists who questioned Lysenkoism in the Stalin era.

If faith in The One requires the faithful to ignore all dispositive evidence, what is the likelihood that the faithful are right and the heretics are wrong?

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September 15, 2008

Democrats think you’re stupid

Nancy Pelosi: “Hey, let’s do a fake energy bill that won’t actually result in new energy production”:

While lifting a 25-year federal ban on most offshore oil and natural gas drilling, the legislation would block Virginia and other coastal states from sharing in a $2.6 trillion bonanza of tax revenue expected to flow from offshore fields. . . .
Unless states stand to profit from offshore development, they almost surely would exercise their right under the bill to block any drilling within 100 miles of their shores, critics of the House initiative charged.
“With no financial incentive, no state will choose to ‘opt in,’ ” House Republican leader John A. Boehner of Ohio told reporters, “and this bill will result in little or no new American energy production.”

This kind of underestimation of the electorate reminds me very much of the Rostenkowski-Wright Congress of 1993-94 — or the DeLay-Hastert Congress of 2005-06. Just engage in a lot of symbolic gestures and figure voters are too stupid to know they’re being played. Good luck with that, Democrats.

July 24, 2008

Big news: Markets work

I was kind of surprised yesterday when John McCain’s statement about oil prices — that President Bush’s lifting of the offshore drilling ban had resulted in a $10-a-barrel wholesale decrease — became the lede of the Associated Press story from Wilkes-Barre. Rush Limbaugh has been saying this for several days, so it didn’t strike me as big news.

When I stopped for gas en route to Wilkes-Barre yesterday, the price was $3.89 a gallon — below the $4-a-gallon price we saw for several weeks — and so, contrary to Nancy Pelosi, we didn’t have to wait years and years for the impact. The mere expectation that the U.S. might allow more drilling was enough to cause speculators to go short.

Actually, Crazy Cousin John understated the impact. As Ed Morrisey notes, oil has now dropped $20 a barrel since Bush lifted the offshore ban. The White House modestly declined to take full credit:

Presidential spokeswoman Dana Perino said the price drop also could reflect diminished demand.
“I don’t know if we fully deserve the credit,” Perino said.
“We don’t predict what happens in the market,” she said. “We can’t really tell. Certainly, taking that action would send a signal that at least the executive branch is serious about moving forward and increasing the supply we have in America.”

What amazes me is how many people — from Nancy Pelosi to Associated Press reporters — seem so shocked about the fact that markets work. Don’t these people know anything about economics?