<!doctype html public "-//w3c//dtd html 4.0 transitional//en"> <html> First, recall that until not very long ago the main scare, even at the Fed, was deflation. I think it would be fair to say that rising oil prices have solved that problem – certainly a plus for accumulators, absolute or differential. Second, your argument about "punitive" effect of higher oil prices on non-oil profit will be correct if oil prices go up while other prices do not. But what if higher oil prices spark a generalized inflation? Will financial intermediaries, automakers, etc. be left far behind? Note that in his recent speech, Greenspan signaled rising profit margins as the main cause for rising inflation this time around -- not bad for an economy running far below capacity with stationary wages (and in fact, hardly an exception; business sector inflation is tightly and positively correlated with profit margins). The FT today speaks of airlines raising prices to “cover” the cost of higher energy. Will others follow? It is hard to tell given the lingering disinflation mentality. But give oil prices enough room to rise, and you may well see this mentality changing. Jonathan ------------------------------------------------------ Jonathan Nitzan wrote: >Now, it is true “everyone” says that they fear inflation and that >they are terrified of stagflation -- just as they all says that they >fear recession and war. And yet, we all know that there are winners >and loser in war and recession. Perhaps there are also winners and >losers in inflation and stagflation? After all, power is relative, >not absolute. When you lose less, you win.... But not as convincingly or thrillingly as when you make more! Like I've said, I agree with you that the oil industry can profit nicely from high prices and Middle Eastern chaos (though if the chaos extends to blowing up Saudi oil facilities, the industry might be less pleased - it won't matter if oil spikes to $100, should the product become undeliverable). But inflation and expensive oil is bad for finance, autos, airlines, tourism, etc. And even though oil has a mighty lock on the Republican party, it's not the politically dominant sector of U.S. capital. So should things start looking nasty enough, oil will find few friends in Washington. Fascinating piece in today's FT on how the oil industry is ready to make peace with Chavez, by the way. Doug ----------------------------------------------------------------------------------------- Jonathan Nitzan Political Science, York University 4700 Keele St., Toronto, Ontario, M3J-1P3, Canada Voice:  (416) 736-2100, ext. 88822 Fax:     (416) 736-5686 E-mail: nitzan@yorku.ca Click on: <a href="http://www.arts.yorku.ca/politics/nitzan/index.html">Nitzan's Home Page</a> <a href="http://www.bnarchives.net">The Bichler & Nitzan Archives</a> <a href="http://www.arts.yorku.ca/politics/nitzan/bnarchives/books/index.html">From War Profits to Peace Dividends (Hebrew)</a> <a href="http://www.ypeonline.com">YPE Online (York Political Economy)</a> <a href="http://n125.arts.yorku.ca/">YPE Archive</a> -----------------------------------------------------------------------------------------  </html>