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The public policy blog of the American Enterprise Institute

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Discussion: (15 comments)

  1. PeakTrader

    Ironically, if output, employment, and oil consumption were back to the 2007 level, the price of oil would be much higher and investment in renewable energy much greater.

    1. MacDaddyWatch

      Not even close. Since crude is dollar denominated like all commodities and the US$ is now near all-time lows, your “analysis” is fatally flawed.

      1. PeakTrader

        The dollar is stonger now than three years ago.

        You don’t seem to believe more demand with a fixed supply will raise the price.

        1. PeakTrader
          1. PeakTrader

            Here’s a 12-year chart of U.S. oil consumption and oil prices (click chart):

            http://earlywarn.blogspot.com/2012/04/us-oil-consumption-and-oil-prices.html

        2. MacDaddyWatch

          You are dead wrong on that one. Like all commodities, crude is dollar denominated. The value of the dollar vis a vis a very broad measure of 100 other currencies, when trade weighted trade and adjusted for inflation, is the lowest its been in HISTORY. ITS NEVER BEEN LOWER. NEVER. Your charts is misleading and it cherry-picks a very narrow and limited currency base.

          What it says is that a dollar today buys less overseas than at almost any time in modern history.

          1. PeakTrader

            MacDaddyWatch, your entire statement is incorrect.

            The U.S. dollar index and the trade weighted dollar index move roughly the same way, like the Dow Industrials and the S&P 500.

            Basically, they’ve been flat for years, because every major economy has been printing more money to get out of this global depression.

            There’s less U.S. demand for foreign goods. So, there’s less foreign production.

            All the major economies are paying more for oil. However, since the U.S. dollar is the world’s reserve currency, our trading partners are also paying more for U.S. Treasury bonds and still need to sell their goods to buy oil.

            Less oil is needed in a global depression (also, conservation, efficiency, alternative fuel, etc. reduce demand). Yet, oil prices remain high, because of fixed supply.

  2. PeakTrader

    “[Obama] will need to choose between pleasing the green purists around him and generating a long boom that would elevate him to Mount Rushmore levels.”

    So far, he’s spent trillions of additional dollars for trillions of dollars of lost output.

    His solution: The people who actually work need to work harder and pay more taxes.

    This isn’t the Clinton economy:

    http://research.stlouisfed.org/fred2/series/EMRATIO/

    1. So far, he’s spent trillions of additional dollars for trillions of dollars of lost output“…

      Hmmm, well pt maybe people are beginning to wake up to the fact that green/renewable energy isn’t the panacea Obama and others are claiming…

      Note the following from the Master Resource blog site about what happened in Michigan:

      Defeating Big-Government Renewables in Michigan (Prop. 3′s “suicide by gluttony”)

      Proposition 3, sponsored by by Michigan Energy-Michigan Jobs (MEMJ), would have forced utilities to produce 25 percent of Michigan’s electricity by 2025 from renewable sources, primarily industrial wind. Despite national backing and a lot of money spent, Michigan voters rejected the “25×25″ measure by a 64–36% margin.

  3. What is missing again is a look at the economics of shale production. We saw the gas hype die off when the projects outside of the core areas could not be self financed and companies had to sell off their leases in order to say in business. I see no reason to expect anything different on the new shale areas unless there is a new technology that could increase yields and lower costs.

  4. Jon Murphy

    Forgive me, but I am a tad less optimistic that this particular bubble has burst. I think the Great Recession set it back, sure, but I don’t think it is gone.

    I am not trying to diminish what you are writing about. These things should be celebrated, and in a normal situation I’d agree with you.

    However, the Green Movement has taken on a religious fervor that probably rivals that of the Crusades. There is a complete disregard for facts. I am not even talking about denying climate change. When one shows charts about falling CO2 per capita emissions, they go nuts trying to deny it.

    Why I say this is a rest rather than a burst is what we saw this past summer: in the midst of the worst drought since the Dust Bowl, the Obama Administration refused to temporarily waive the ethanol requirements. This whole ethanol thing is the modern equivalent of fiddling while Rome burns. The world’s most fertile nation uses its food for (inferior) fuel while the world goes hungry. It’s shameful. But I digress.

    I am optimistic that our technology will keep getting cleaner. Fracking will help.

    But I also fear that more and more money will be poured into inferior technologies once the world economies emerge from this morass and growth quickens.

  5. Benjamin Cole

    So, was it the Fed that made the renewable energy sector boom and bust?

    Side note: Apple just announced they are making computers in the USA again. Probably more and more—product cycles shrinking, need new product constantly.

    Need engineers to actually know how to design for manufacturing quickly….

  6. morganovich

    benji-

    i think it was the federal government that drove the renewables bubble and bust. vast subsidies, preferential tax treatment, “stimulus”, and all manner of regulation that made traditional energy more difficult and required the use of things like ethanol are what drove it and even that could not stop economic reality from ultimately winning out.

    where are you getting this notion that it was the fed? (though with rates so low, all equities benefit, so one could argue that they made it easier to form an equity bubble)

    perhaps it’s time for an energy start up that generates power by burning the stock certificates of defunct alt energy companies (and perhaps the hard copies of eco legislation)?

    1. perhaps it’s time for an energy start up that generates power by burning the stock certificates of defunct alt energy companies (and perhaps the hard copies of eco legislation)?

      There is precedent for that idea.

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