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Impact of oil on economy limited so far: Bodman
Chris Baltimore, Reuters via Yahoo News
High crude oil prices have had some impact on U.S. economic growth but the pain is not on the level seen during the energy price shocks of the 1970s, U.S. Energy Secretary Sam Bodman said on Wednesday.
I am surprised that we have not in the past seen more of an effect on our economy from these high oil prices,” Bodman told reporters in an interview. “The impact of oil on the economic performance of the United States is not what it once was … 30 years ago.”
…Bodman said that there would clearly be an impact on crude oil prices if exports from
Iran were Reutersut he reiterated that the world’s consumer nations are prepared to deal wsuch a cutoff by using their strategic oil stocks.
(2 Aug 2006)
Contributor DM writes:
I was listening to NPR (I’m pretty sure it was Marketplace) this afternoon. They were discussing the Prudhoe Bay/BP/pipeline story, and quoted Sam Bodman (US energy secretary) saying the usual things. Then they also quoted him as saying that supressing Iran’s nuclear program was “much more important than maintaining low oil prices.”
That got my attention. I’ve always thought that we weren’t stupid enough to hit Iran, but now, I’m not at all sure.
Does anybody have a link to the Bodman interview? -BA
Certain elements of the press certainly seem to be preparing the population for war. See the Sunday Time’s Iran’s plot to mine uranium in Africa, which while I don’t claim to have sources of better information, certainly smells a bit too much like pre-Iraq war scare mongering. The comparison to the discredited Iraq-Nigerian uranium connection is unavoidable. It’s an ominous sign that such articles are deemed necessary, yet it seems, at least, that most of the global press is not treating these claims at face value as the story has not been repeated widely.
-AF
The Threat From Oil
BCA Researcg
High oil prices will reinforce the global growth slowdown that is developing.
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Oil prices rose to over US$77 per barrel yesterday after BP closed 400k barrels of U.S. crude output (nearly 0.5% of global production) due to environmental concerns. At current prices, the world’s oil bill will reach US$2.1 trillion this year, equivalent to 4.6% of global GDP. That is up nearly one percentage point from last year and more than double the average of the past twenty years. While the global economy has shown impressive resilience to rising energy prices in the past three years, the adverse impact will become more pronounced as the earlier tailwind from low interest rates and booming housing fade. Bottom line: high oil prices will dampen global economic growth.
(9 Aug 2006)
WT writes: “No surprises here, but the chart may be of interest.” (See original for chart).
‘Dead Zone’ Threat to US Suburban Dream
Paul Harris, Observer/UK via Common Dreams
Petrol price rises may cause the housing bubble to burst, triggering global recession and the fall of America’s Eden
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Levitown is a bus ride beyond the aptly named Hicksville in the outer suburbs of New York. Its lawns are neat and its houses boxy. From many gardens fly American flags and yellow ribbons: typical displays of suburban patriotism.
It was here, almost 60 years ago, that modern American suburbia was born. Work began on the town in 1947 and Long Island potato fields were soon covered with a radical new form of housing: single, similar, purpose-built houses designed for car-owners and aimed at families. At the time it was a shock. Social scientists scoffed at Levittown. But within decades the suburban experiment had come to define US life and what began in Levittown now covers the country in urban sprawl, strip malls and a way of life revolving around the car.
Now there are fears it is coming to an end. For the past five years America has been gripped by a housing price bubble. It has funded a huge expansion of suburbia as Americans poured their wealth into their homes. Yet many think that bubble may be about to burst. That would send shock waves through the US economy and into the rest of the world. Nor is that the only threat. The rising price of oil is squeezing suburbanites. It threatens a way of life where pavements are rare and everyone moves by car.
‘We have invested all our wealth in a living arrangement with no future,’ said James Howard Kunstler, author of The Long Emergency which postulates the end of suburbia. ‘In building suburbia we embarked on the greatest misallocation of wealth in the history of the world.
(6 Aug 2006)
US: Housing glut worst in 40 years
CNN Money
Homebuilder Toll Brothers said the current slump in residential construction is unlike any it has seen in 40 years as it became the latest to warn of a glut in new homes for sale and a slowdown in the closely watched real estate market…
In a statement, company chairman Robert Toll warned there is a glut of supply of homes for sale in the market, as the building boom of recent years seems to be turning into a bust.
The slowdown “is the first downturn in the forty years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors,” Toll said in his statement.
“Instead, it seems to be the result of an oversupply of inventory and a decline in confidence,” he added. “Speculative buyers who spurred demand in 2004 and 2005 are now sellers; builders that built speculative homes must now move their specs; and nervous buyers are canceling contracts for homes already under construction.”
(9 Aug 2006)
The odds of economic meltdown
Brad DeLong, Salon
With interest rates and oil prices rising and consumers spending beyond their means, we may be headed for recession — and worse.
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Never say that a recession is coming. Say only that a recession is here, or that there might be a recession on the way. Which, in fact, is what I’m saying today. As of the beginning of August 2006, a recession is not here, and I’m not going to violate my own rule by saying one is coming. But there is a good chance — for the first time since 2003 — that there might be a recession in progress six months from now.
Why? Three factors: 1) A Federal Reserve that finds itself with less inflation-fighting credibility than it thought it had; 2) upward pressure on inflation from rising energy and, perhaps, import prices; and 3) millions of middle-class homeowners who for too long have treated their houses as gigantic ATMs, using home equity loans and refinancing to generate extra spending money.
(4 Aug 2006)
Brad DeLong is a professor of economics at the University of California at Berkeley, a blogger and a research associate of the National Bureau of Economic Research, and was a deputy assistant secretary of the U.S. Treasury from 1993 to 1995.
