Comments on economics, mystery fiction, drama, and art.

Friday, May 30, 2008

The Future of Crude Oil

A very strong piece from the Federal Reserve Bank of Dallas, by Stephen P. A. Brown, Raghav Virmani and Richard Alm, on recent trends and reasonable expectations about the global market for crude oil. Their conclusion:

"The substantial development of these nonconventional oil resources could mean downward pressure on crude oil prices in future years. Actual and expected costs of nonconventional resources suggest it might be difficult to sustain oil prices above $70 a barrel. However, the relatively high costs of these nonconventional oil sources could inhibit development because producers fear losses during a price collapse. The production and use of nonconventional resources would also generate more pollution, which could mean conventional oil could command a premium.

"What’s the bottom line? Absent supply disruptions, it will be difficult to sustain oil prices above $100 (in 2008 dollars) over the next 10 years."

Tuesday, May 20, 2008

Keynes on Speculation

Sounds like the current tribulations in housing markets:

"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism…."

Found on Mark Thoma's blog, cited by him from a post by Tim Duy. The quote itself is from The General Theory..., p. 159.

Wednesday, May 07, 2008

Annals of International Trade

As Dave Barry used to say in his columns, I am not making this up:

"The U.S. baking industry's trade association, representing firms such as Kellogg Co., Sara Lee Corp. and Interstate Bakeries Corp., plans a march on Washington by the firms' employees later this month to press for a reduction in U.S. wheat exports."

Yep. With wheat at $18 a bushel, times are hard for Sara Lee. And so they turn, in typical free-market fashion, to government invervention intended to push their costs down and make someone else--wheat farmers, people in countries (like Mexico) that import wheat--worse off. It's almost beyond satire.

From Felix Salmon via Paul Krugman.