Category Archives: Economics

Business, Economics, Media Criticism, Political Commentary

Full Employment

4 Comments

No, we’re nowhere close to it:

Measured against where these people expected the economy to be at this point seven years ago, the economy is indeed awful. Millions of people who should have jobs don’t, and those who do have jobs are working for much lower wages than would be the case in a healthy economy.

This is the worst economic recovery since the Great Depression. For most of the same reasons.

Note, I don’t agree with Baker’s recommendations, though.

[Update a few minutes later]

Of 3000 counties, only 65 have recovered from the recession.

Business, Economics, Media Criticism, Political Commentary, Technology and Society

Fifty-Dollar Oil

19 Comments

Is it a floor, or a ceiling?

Competitive market conditions would therefore dictate that Saudi Arabia and other low-cost producers always operate at full capacity, while US frackers would experience the boom-bust cycles typical of commodity markets, shutting down when global demand is weak or new low-cost supplies come onstream from Iraq, Libya, Iran, or Russia, and ramping up production only during global booms when oil demand is at a peak.

Under this competitive logic, the marginal cost of US shale oil would become a ceiling for global oil prices, whereas the costs of relatively remote and marginal conventional oilfields in OPEC and Russia would set a floor. As it happens, estimates of shale-oil production costs are mostly around $50, while marginal conventional oilfields generally break even at around $20. Thus, the trading range in the brave new world of competitive oil should be roughly $20 to $50.

Makes sense to me.

[Update a few minutes later]

I’ve long said that oil over a (inflation adjusted) hundred dollars a barrel was unsustainable. This would seem to validate that.