May 21, 2009
Link to JEC video
The Joint Economic Committee has now posted a video of yesterday's hearing on oil and the economy. My statement starts at about 11 minutes.
Posted by James Hamilton at May 21, 2009 10:20 AMdigg this | reddit
Very clear, straight-forward testimony. I have to say, I did not disagree with a single statement you or Yergin said.
I think it interesting that, after some years of divergence between 'peakists' and 'commodity-cyclers' (well, maybe you can suggest something better), the consensus seems to have converged to what might be called 'plateau' or 'tight' oil view, which posits that finding oil is not getting easier or cheaper, and that increasingly the oil supply will be something of a challenge.
Posted by: Steve Kopits at May 21, 2009 03:11 PM
So investing heavily in energy saving (saved or NOT used energy is the best alternative energy there is) finally should get off? Without false hopes that oil will be permanently cheaper one day or that heavy dependence on foreign energy imports is good.
Posted by: Ivars at May 22, 2009 05:27 AM
Once the hippies go senile, we'll have nucler gain.
Posted by: Troll at May 23, 2009 02:40 PM
Jevons Paradox says that energy efficiency will not gain us as much as the numbers suggest. An increase in efficiency of 10% might only decrease use by 5% or it could increase use by 5% depending on the supply/demand curve.
That can be offset by increased taxes. However, what you usually get from taxes is a large dead weight loss. If it costs to increase efficiency (it will) the net effect of more taxes can be anything from a reduction in growth to negative growth.
The only way out is to increase energy supplies. Where is that to come from? Tar sand reserves in America are very large. There is also a lot of offshore oil yet to be discovered. Alaska has untapped reserves. All of those are off limits to varying degrees by law.
If we started tapping those reserves we have more than enough energy to carry us through the 50 to 75 years it will take to develop ECONOMICAL alternatives. By pushing alternatives before they are economical we are creating further dead weight losses to the economy.
Fortunately our new President and Congress understands all this and will do the right thing. (/sarc off)
Posted by: M. Simon at May 25, 2009 01:57 AM
Unfortunately, what the U.S. gets from refusal to raise taxes is debt that will inhibit future governmental actions. Future citizens are not going to like paying taxes any more than present citizens. So, do we keep on postponing taxes until the U.S. dollar is worthless? Is that what you want, Mr. Simon?
Posted by: ReformerRay at May 26, 2009 07:57 AM
In interesting little point Prof Hamilton made was the value that futures markets serve as providing price information to the market.
I propose that futures markets are poor at judging that as well. I certainly remember the oil futures curve during the blowoff top. That said, I don't know if one can make a decent case for the futures markets providing any more valuable information about future price if they did not exist in the first place. Look to the curve for that verification. They were better at confirming a late 09 price recovery than what ensued before, but markets are merely an expression of that and every other interlocking market and economic data that goes into it.
The whole little tangent about delineating between hedging and speculation was a discussion of semantics. All participation in business is speculation. Every decision made into uncertainty is a gamble. It was all sort of moot.
Bottom line: Are we -collectively- better off because of the existence of futures markets? Probably not. I'm not against speculation nor do I have an anti-futures market position, but I'm definately not deluded about how valuable these markets are to our society. They are merely another place for gamesmanship, whether under the corporate or speculative guise, to occur.
I think the same goes for most "financial technology" - it often enhances liquidity and velocity... until it doesn't, as a result of the inevitable blowups that leverage provides. (fractional reserve banking amongst the foremost of these technologies) But I guess it works more often than not, so the benefits must make it worth doing.
Posted by: Michael at May 26, 2009 09:41 AM