Last Summer's Crisis Revisited
June 10, 2009
This column in the Detroit Free Press does a good job summing up last summer's crisis in the context of today:
Here is the thing: it's typically assumed that energy prices and economic output are related. In a booming economy, energy prices should be high and in a down economy they should be cheap. So in light of the fact that we have the worst economy in 25 years and energy prices at above-average historical highs, it certainly seems like cause for concern. And it is.
Ryan Avent has a great piece about how energy prices could thwart the possibility of an economic recovery. The one thing that will be true is that they will impact some groups disproportionately more than others. Industries that are energy-intensive will have a more difficult time recovering than those that aren't. Individuals who take advantage of the down housing market and buy homes in the exurbs and the collapse of the American autos to buy big vehicles to get around will likely find themselves in the same annoying situation so many were complaining about last summer.
Gas prices are sneaking up again, into territory that's making me cringe, not just for my own budget but because so many people are pinching every penny in this miserable economy. The experts are saying we shouldn’t fear a repeat of 2008’s unbelievable record prices, when gas topped $4 a gallon and really got people to cut back on driving and rethink buying vehicles without regard to fuel efficiency. OK. Can we slow down the recent rise, then?Amazing to think that it was only a year ago that the hottest topic on this blog (and elsewhere) was the energy crisis. You remember, right? When crude oil crossed the $100 mark and kept skyrocketing upward; and when gasoline made it into the $4 per gallon range and freaked out everyone who drives a car on a regular basis. Politicians blamed the evil Wall Street "speculators" and consumers thought they could boycott their way to lower prices.
Here is the thing: it's typically assumed that energy prices and economic output are related. In a booming economy, energy prices should be high and in a down economy they should be cheap. So in light of the fact that we have the worst economy in 25 years and energy prices at above-average historical highs, it certainly seems like cause for concern. And it is.
Ryan Avent has a great piece about how energy prices could thwart the possibility of an economic recovery. The one thing that will be true is that they will impact some groups disproportionately more than others. Industries that are energy-intensive will have a more difficult time recovering than those that aren't. Individuals who take advantage of the down housing market and buy homes in the exurbs and the collapse of the American autos to buy big vehicles to get around will likely find themselves in the same annoying situation so many were complaining about last summer.
