{"id":619,"date":"2008-05-22T21:35:00","date_gmt":"2008-05-23T02:35:00","guid":{"rendered":"http:\/\/www.joewhite.com\/?p=619"},"modified":"2008-05-22T21:35:03","modified_gmt":"2008-05-23T02:35:03","slug":"i-really-need-an-economics-category","status":"publish","type":"post","link":"https:\/\/www.joewhite.com\/ramble\/2008\/05\/i-really-need-an-economics-category\/","title":{"rendered":"I really need an Economics category"},"content":{"rendered":"

Why prices rise (by Russell Roberts)<\/a>:<\/p>\n

Steve Mufson at the Washington Post<\/a> is bewitched, bothered, and bewildered about why oil prices keep rising. The headline:<\/p>\n

Skyrocketing Oil Prices Stump Experts<\/strong><\/span><\/p>\n

The article begins:<\/p>\n

\n

Confused about oil prices? So are the experts.<\/p>\n

Executives from the giant oil companies say it’s partly the fault of “speculators” or financial players. Key financial players say it’s really a question of limited supply and expanding global demand. Some members of Congress accuse the Organization of the Petroleum Exporting Countries<\/a> for bottling up some of its production capacity. And OPEC blames speculators, wasteful U.S. consumers and feckless U.S. policy.<\/p>\n

Almost everyone points at China’s growing appetite for fuel.<\/p>\n

Whatever the causes, one of the most dizzying runs in the history of oil prices picked up pace yesterday — again — as crude oil prices jumped to settle at more than $133 a barrel, up $4.19 in one day, 18 percent so far this month and more than one-third so far this year.<\/p>\n

Prices climbed even higher in late electronic trading.<\/p><\/blockquote>\n

After a few paragraphs explaining the impacts of the higher prices, the Post quotes an expert who does have a theory:<\/p><\/blockquote>\n

But the bigger question is: What has been driving the doubling of prices over the past year even as U.S. demand has stagnated and global output has continued without any major new disruption?<\/p>\n

“The basic story that has brought oil from $20 to $130 dollars is that world demand is growing robustly when world supply is not,” argued Jeffrey Rubin, chief economist of CIBC World Markets<\/a>. “As a result, we need ever-higher world oil prices to kill demand in the [industrialized countries], which is exactly what’s happening.”<\/p>\n

While U.S. demand has leveled off, Rubin said, demand in China is growing at a 12 percent rate, more than the 8 percent rate he forecast. While the extra increase in China is probably because of short-term factors, such as the earthquake or hoarding by the government in preparation for the Olympics, Rubin said even the lower rate would keep world demand growing briskly.<\/p><\/blockquote>\n

Hmmm. Seems pretty straightforward, doesn’t it? Rubin doesn’t seem stumped. I’m not sure why this article was written. I think the author wants one<\/em><\/strong> reason. China. Speculation. Greed. (Or more accurately, an increase in greed.) But the simplest explanation is that world demand is growing briskly and world supply is not as responsive.<\/p>\n

If we want low gas prices, we should lower the costs of exploration and refining. If lowering those costs has environmental costs you don’t like, stop complaining and get on your bicycle.<\/p>\n

\n

<\/a> <\/a> <\/a> <\/a> <\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

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