And what does that data show?
And what does that data show?
A research paper by Eyal Dvir of Boston College and Ken Rogoff of Harvard suggests some interesting parallels between the recent behavior of oil prices and what was observed at the very beginning of the industry. I’ve been doing some related research on the history of the oil industry that looks into the events behind historical oil price shocks.
I could certainly imagine that an abrupt move up in gasoline prices from here could hurt the struggling recovery of the domestic auto sector and dampen overall consumer spending. I do not think it would be enough to give us a second economic downturn, but it could easily be a factor reducing the growth rate.
Paul Krugman observes that there are many real side factors that should drive oil prices higher (in an article that cites Jim’s 2009 paper). I certainly don’t have much to add in terms of thinking about oil prices and domestic macro implications, but Krugman’s note did impel me to examine more closely the international aspects of the underlying demand factors.
The price of oil moved above $90 a barrel yesterday. Is it time to become concerned about the possible macroeconomic effects?
A recent series of statements and concrete actions by leaders from Ashgabat shows a clear willingness and desire to implement the “European direction” as a component of the country’s international gas export policy. Technical obstacles are mainly solved, and the only remaining political obstacle appears to be Europe’s difficulty in concentrating its attention to take the necessary steps from its own side. The last chance for this seemingly will begin to expire early next year.
When Russian President Dmitry Medvedev visited China the last week of September, pride of place in the diplomatic agenda was made manifest in a ceremony marking completion of the Skovorodino-Daqing oil pipeline between the two countries built in just 20 months. Comprising a 576-mile spur on the Chinese side of the border to the longtime energy-sector city of Daqing and a 45-mile connector on the Russian side to the East Siberia-Pacific Ocean (ESPO) oil pipeline, it will allow Russia to export 300,000 barrels per day to China over the course of two decades, representing roughly eight percent of current Chinese imports and four percent of current consumption. Pursuant to a February 2009 agreement, Russian para-statal energy companies received $25 billion in loans in order to construct this pipeline and as pre-payment for oil to be received.
Yesterday was OPEC’s 50th birthday. The occasion is being met with celebration in Vienna, the host of the OPEC secretariat, and in OPEC capital cities (see FT beyond BRICS for more). Production still remains well below the 2008 peak, or even the average of 2006-8 (despite oil averaging around US$75 per barrel for most of the last year), but was inching up until mid-year and is currently at a price level where all but OPEC’s overspenders can balance their budgets. All in all, assume status quo of unchanged production at OPEC’s next meeting in October, as the prospects for oil demand growth cool along with the global economy. In the longer-term demand, particularly from EM Asia (and oil exporters themselves), should keep prices high.