27 February 2011

If You Say So

I hope no one stakes their professional reputation on this:

More broadly, Lacker said higher oil prices are a “manageable risk” for the U.S. economy. “I think that the oil-price increase we’ve seen so far doesn’t pose a risk to the recovery,” Lacker said, although he added “oil-price changes could have the potential, if they were very large, for slowing the economy.”

And how, exactly, are higher oil prices a “manageable risk”?  Manageable how?  And by whom?  It isn’t like America gets the bulk of its oil within its own borders.  And it isn’t like the local market isn’t susceptible to international demand anyway.  And given how the federal government has instituted a wide variety of restrictions and regulations on oil production, and energy production in general, it is patently ludicrous to suggest the risk we have is “manageable.”

And remember that old saying?  “You ain’t seen nothin’ yet”?  That’s exactly what’s going to happen with oil and energy prices.  In fact, it’s happening now.  Gas over $3/gallon in every state, and in California the price is over $4/gallon.  Given production instability in the middle east and QE2, there is simply no reason to think that oil-price changes will be anything other than large in the coming months.

In short, this analysis relies on optimism that borders on the absurd in order to reach a conclusion of wishful thinking.  The reality is that we’re screwed, and will be for a while.  The high energy costs will be a reminder of that.

2 comments:

  1. The only person who could say something like that is someone who is so far removed from the effects of high-priced oil so as to not notice...or even derive a net profit from it.

    On Faux News yesterday, there was a commentator that remarked about how W broke the back of $5/gal gasoline by authorizing drilling that was heretofore off limits. Oil prices dropped immediately.

    So all this hand-wringing about expensive oil is partially a function of our rulers' own choices. In the meantime we get clowns like this spouting all this Keynesian animal-spirits happy talk when he knows full we he won't suffer the adverse affects. Nice.

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  2. "On Faux News yesterday, there was a commentator that remarked about how W broke the back of $5/gal gasoline by authorizing drilling that was heretofore off limits. Oil prices dropped immediately."

    If I recall correctly, that was in regards to ANWR in the summer of '08. The thing is, Bush couldn't authorize drilling, as the original legislation clearly states that exemptions must be granted by congress. Still, the threat was credible enough to work.

    The analyst is technically correct in saying the situation is manageable. Unfortunately, the situation is managed by the federal government, and it has done a really poor job.

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