tag:blogger.com,1999:blog-4900303239154048192.post7113189890046313990..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: The Political Economy of Oil (and Other Sectors of a Modern Economy, Considered Separately)Unknownnoreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4900303239154048192.post-24580996994351793872016-02-14T19:29:01.759-05:002016-02-14T19:29:01.759-05:00I wonder to what extent "Oil is special"...I wonder to what extent "Oil is special" in that there are multiple second order effects. The fall in oil prices may be good for GDP but the sudden reversal of petrodollar financial flows are themselves going to alter the investment prospects buy reducing the supply of investment. Oil is too concentrated a resource in some ways to really infer effects. Every major oil country and the related individuals are tapping their savings to smooth consumption. From a US dollar perspective this is contractionary which itself could effect the future path of interest rates.<br /><br />I think you may be right but the weird structure of the oil market may make it hard to figure out how interconnected the economy is on a sectoral level.Unknownhttps://www.blogger.com/profile/13305124836711242805noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-88151686941601271192016-02-12T17:29:44.151-05:002016-02-12T17:29:44.151-05:00Barkley, I could be very wrong but my hypothesis i...Barkley, I could be very wrong but my hypothesis is financialization, as I briefly sketch at the end. If this hypothesis is true, it's not accurate any more to think of firms simply as production/sales units with inputs and outputs; they are portfolios with lots of interdependent valuation.<br /><br />But this is empirically testable, directly and indirectly. One purpose of my post is to see if I can interest anyone in such tests.<br /><br />And if the hypothesis is disconfirmed, I still read the recent history of health care and climate policy as saying that it's unlikely to expect that a single sector can be defeated in isolation by forming an alliance with the rest of capital. The problem would be to explain why.Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-49929974506328218842016-02-12T12:08:30.347-05:002016-02-12T12:08:30.347-05:00Oh, and of course industries providing inputs to t...Oh, and of course industries providing inputs to the oil sector are also hurt when oil prices fall.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-74847951444036842002016-02-12T12:01:39.343-05:002016-02-12T12:01:39.343-05:00Peter,
Unless a sector uses oil or an energy inpu...Peter,<br /><br />Unless a sector uses oil or an energy input that oil could substitute for, their profits improve when oil prices fall and their stock prices should go up. The current market seems oblivious to this basic fact.<br /><br />That said, you may be right on the larger pol econ issue that other sectors may not want to see too much squashing of oil sector profits because they may fear that they will be next.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-84654851381220748002016-02-12T11:40:55.874-05:002016-02-12T11:40:55.874-05:00Mary, yes, certainly. And there begins a project,...Mary, yes, certainly. And there begins a project, since the kind of hypothesis I'm proposing is not restricted to oil. Really the question is about the interdependence of profit expectations net of their cyclical component. Can a political movement say, "we want a policy that will benefit society but hammer sector A" and enlist the other sectors against A?Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-49850229007305018382016-02-12T10:19:58.557-05:002016-02-12T10:19:58.557-05:00But, the spx contains a fairly large oil industry ...But, the spx contains a fairly large oil industry component. Would it not be more useful to divide the spx into industry segments and see the strength of the effect there? Mary Robinsonhttps://www.blogger.com/profile/12953349287856947944noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-79310034383345117452016-02-11T23:31:37.783-05:002016-02-11T23:31:37.783-05:00Barkley, I think you're missing the point of t...Barkley, I think you're missing the point of this post. I'm not discussing the relationship between oil prices and economic growth or long-term ups and downs in equities. This is about the relationship between event-driven changes in oil revenues and non-oil profit expectations as a point of entry into the larger political economic question of sectoral profits are less susceptible to isolation than in the past.Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-90432705174805330612016-02-11T17:14:50.223-05:002016-02-11T17:14:50.223-05:00On the matter of the basic relation, the more inte...On the matter of the basic relation, the more interesting one is really the relation between US GDP and oil prices, which is pretty clear cut, lower oil prices, better GDP performance, although there is a reverese causation that when the GDP goes into a major recession or depression, that can lead to a major decline in oil prices, as in 1930 and 2008.<br /><br />Anyway, sticking with stock markets and oil prices, I think aside from these GD and GR cases, you have to look very hard to find cases where they moved together aside from within the last year, which looks to me absurdly anomalous and too focused on a return to 2008 (which I do not see), not to mention too much hyperventilating about the financial problems coming from the oil-producing patch (bankruptcies by North Dakota frackers are really going to bring down the US financial sector? I seriously doubt it). There is also the fact that declines in retail gasoline prices have not matched the declines in crude oil prices, and this is where the rubber hits the road in terms of stimulating the economy.<br /><br />So, let us go back a bit. When did we have the boomiest stock markets (sometimes matched by GDP)? Well, the 1960s look great on both fronts. Crude oil prices were about a dollar a barrel the whole decade, and retail gasoline was cheap (bring on those big gas-hog US cars!). We had oil price shocks in 73-74 and 79-80, and both the GDP and the stock market took big hits. Oil prices dropped in 81-82 and stayed down, even going lower in 86 temporarily. This helped the rapid bounceback from the 82 recession, with the stock market taking off and eventually getting into a bubble into Oct. 87.<br /><br />Then we have the last round of really low oil prices, the late 90s. Both the GDp and the stock market did very well, with again the stock market getting into a bubble, although that was tied to dotcom stocks rather than oil, although people forget how those very low oil and gasoline prices bolstered that very nice boom that lowered unemployment and poverty rates across the board even as inflation remained low (opposite of the stagflation of the 70s).<br /><br />So, Peter, I do not think the case is so even handed as you say. Lower oil prices will eventually kick in to stimulate the US GDP, whether or not it stimulates the US stock market, I do not know. But you have way exaggerated how even this debate is. rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.com