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In world oil markets US fracked oil is the marginal supply of oil.
Oil has to be $80/bbl to make US fracked oil profit. If oil falls below this threshold the supply of fracked oil will start contracting.This creates a very solid floor for world oil prices.
This is a structural shift from what has prevailed historically.
Traditionally, in the oil industry virtually all your costs were fixed or sunk cost and variable cost were relatively insignificant. So when prices fall it pays oil producers to continue producing as long as revenues exceeded variable costs.
So low prices did not cause oil supplies to contract as intro economic theory implied. But now, fracked oil wells have a very short life span --2 to 3 years -- and it requires very large variable costs to keep the oil flowing. Consequently, if prices fall to about or under $80/bbl the supply of fracked oil will contract quickly.
This produces a very solid floor under oil prices of about $80
and since oil is the almost perfect example of one world price
this floor price applies to the entire world-wide oil supply.
Posts on Gasoline Prices and Secular Stagnation
I'm visiting my son Paul in Seattle today (he works at Amazon as an analyst), so just a quick post for now on two topics. First is Jim Hamilton on oil prices. He explains why the "boom in domestic drilling is bringing some real benefits to the U.S. economy. But a lower gasoline price for U.S. co...
I worked in the investment community during the time of the bond vigilantes. Every time I hears some bond manager bragging about punishing the government I would ask them how losing their clients money punished the government? I got a lot of strange looks, but no one ever answered the question.
Back When I Feared the Bond-Market Vigilantes: Maundering Old-Timer Reminiscence Weblogging
I think Paul Krugman gets one partially wrong today… Paul writes, correctly: >Maya and the Vigilantes: Maya MacGuineas… is the queen of the deficit scolds, having run the Committee for a Responsible Federal Budget, perhaps the most prominent of the many Pete Peterson-backed organizations trying...
But there was no gas shortage.
There was plenty of gas in the service station tanks.
There was an electricity shortage so they could not pump the gas.
Your entire analysis is off-base.
A little something for your classroom ... just because I care!
From the WSJ's Micro Weekly email: New York's Economics Blackout by: Editorial Staff Nov 05, 2012 Click here to view the full article on WSJ.com TOPICS: Price Control, Supply and Demand SUMMARY: Cuomo vs. Christie on gasoline shortages. "Public jobs would be so much easier if politicians could...
Labor compensation data does not include payments in the form of stock options.
Since this has been the major source of the explosion of the
compensation of top executives I wonder if this is really an
unrecorded increase in executive compensation rather than an increase in profits.
I have not seen a good estimate of how large the increase in stock options has been and how much it distorts the compensation data -- does anyone know of one??
"It’s Obvious Where Profits Have Come From"
Menzie Chinn says "there is substantial space for rising wages": Competitiveness, and the Bush Tax Cuts and Deficits, by Menzie Chinn: The Administration released the annual Economic Report of the President on Friday. Many topics were covered, but here I’ll remark upon a few issues, motivated ...
Your link does not work.
It leads to a blank page.
Are Budget Problems Due to Rising Health Care Costs as Scary as We've Been Led to Believe?
Not too long ago, I sent the following email to several people I thought might have the answer: Something that's been bugging me -- I don't know much about how they estimated future health care cost increases, but since that is largely behind the budget problems -- and hence the source of the ab...
Sorry, pasted the wrong link.
http://notaneconomist.wordpress.com/2011/10/06/health-care-costs-down-the-up-escalator/#more-546
Are Budget Problems Due to Rising Health Care Costs as Scary as We've Been Led to Believe?
Not too long ago, I sent the following email to several people I thought might have the answer: Something that's been bugging me -- I don't know much about how they estimated future health care cost increases, but since that is largely behind the budget problems -- and hence the source of the ab...
The standard way to look at health care spending is as a share of GDP. Looked at this way it looks like the monster that ate Tokyo --an insurmountable problem.
But if you look at the growth in health care spending in isolation you get a very different perspective. This shows that for years the trend in health care spending has been for ever slower growth. Apparently in recent years the problem has been more of weak GDP growth not strong health care spending growth.
http://www.angrybearblog.com/2011/10/health-care-spending.html?m=0
At not an economists he looked at the data in different ways,
but it still shows a trend of slowing health care spending.
http://www.angrybearblog.com/2011/10/health-care-spending.html?m=0
Are Budget Problems Due to Rising Health Care Costs as Scary as We've Been Led to Believe?
Not too long ago, I sent the following email to several people I thought might have the answer: Something that's been bugging me -- I don't know much about how they estimated future health care cost increases, but since that is largely behind the budget problems -- and hence the source of the ab...
You connected to Kling where he advances the theory that cutting taxes on savings, or increasing the return to savings will lead to more savings.
But we have been implementing such policies for over 30 years now through 401s, IRAs, etc., and we have developed a wealth of data that directly contradicts that theory.
The alternative theory is that people save to achieve a goal--maybe having a million dollar portfolio at retirement, for example. If people save to achieve a goal than increasing their rate of return leads to less, not more savings. Greenspan even coauthored a paper that demonstrated this.
How long are we going to let people like Kling get away with such obviously bad and disproved theories????
Links for 2012-01-27
The BEPress Journals Have Sold Out - Cheap Talk Berkeley Electronic Press Closes up Journals - Digitopoly A less opaque Fed will become boring - FT.com The Debate on Private Equity in 1989 - Rortybomb Elsevier’s economic case is lacking - Digitopoly Two Percent Is Not Enough - Paul Krugman ...
The regulations are written the way they are because the corporate lobbyist want them to be written that way.
Democrats are Not Anti-Market
A recent column (on the claim that Democrat are anti-market, socialists, see here too): Democrats are Not Anti-Market, by Mark Thoma: Republican hopefuls are attempting to portray the coming presidential election as a battle between people who believe in free markets and those who want to turn t...
I forgot, 9. A financial panic that required the largest government bailout in history to keep the financial system from imploding on itself.
Democrats are Not Anti-Market
A recent column (on the claim that Democrat are anti-market, socialists, see here too): Democrats are Not Anti-Market, by Mark Thoma: Republican hopefuls are attempting to portray the coming presidential election as a battle between people who believe in free markets and those who want to turn t...
During the 8 years of the Bush administration pro-market policies we had:
1. The weakest economic expansion on record.
2. Essentially zero employment growth.
3. The personal savings rate fell to nearly zero.
4. The federal budget swung from a surplus equal to some 2% of GDP to a deficit equal to about 10% of GDP.
5. The trade weighted dollar fell over a third.
6. Depending on what measure you use the stock market fell some 40% to 50%.
7. Oh yes, his term ended in the second worse recession in US economic history.
Why any businessman would view the Republican record and think their policies were good for business is beyond me.
Democrats are Not Anti-Market
A recent column (on the claim that Democrat are anti-market, socialists, see here too): Democrats are Not Anti-Market, by Mark Thoma: Republican hopefuls are attempting to portray the coming presidential election as a battle between people who believe in free markets and those who want to turn t...
This chart compares statutory rates where, for example the US rate is 39% even though the effective rate for the US is around 21%.
Comparing statutory tax rates is pure junk economics comparable to looking under the street light for the car keys you lost in the parking lot.
Trends in OECD corporate income tax rates
From the OECD's Tax Database (Table II.1): The last few decades has seen extensive work documenting the deleterious effects of corporate income taxes - especially for small open economies. These lessons seem to have been taken to heart by policy-makers.
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