[lbo-talk] Poltical effect of Hurricane Rita

Victor victor at kfar-hanassi.org.il
Thu Sep 22 22:18:13 PDT 2005


Interesting article. Just one comment. As Doug wrote the fact that this crises may include a significant rise in petrol products as well as of crude, is likely to complicate considerably the fairly simple mechanisms cited in the article. Thanks. Victor ----- Original Message ----- From: "Mark S" <bunyak1 at hotmail.com> To: <lbo-talk at lbo-talk.org> Sent: Friday, September 23, 2005 0:56 Subject: RE: [lbo-talk] Poltical effect of Hurricane Rita

Doug Henwood wrote:
>
>Every time gasoline has spiked like this, there's been a recession. A
>complicating factor is that prices for refined products have risen much
>more than underlying crude prices (in earlier spikes, like 1974 and 1980,
>it was the reverse). Still, with energy prices up strongly (and natgas is
>up like crazy too) and the Fed tightening, it doesn't seem outlandish to
>expect a recession, or a near-recession, in 2006. I don't know if that
>qualifies as a "breaking point" though. But I suspect the Fed may be trying
>to engineer something like a recession, to burst the housing bubble and get
>energy demand down.
>
CIBC World Markets concurs about a recession in their September publication (http://research.cibcwm.com/economic_public/download/sep05.pdf) but they admit that nobody knows the trigger price for a recession.

They also provide a thorough analysis of an issue that most people don't think about: the effect of higher energy costs on global trade (p. 6). They note that the largest gains to global trade occurred when energy prices were low or falling. They also compare the cost of moving a container from either Hong Kong or Mexico to New York at various oil price points. Esoteric but interesting...

M.

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