At 07:41 PM 3/21/2004 -0800 Doug Pensinger wrote:
>A few questions. In the late '70s oil prices spiked and the result was
>double digit inflation (one of the things that killed Carter's re-elction
>bid). This year oil prices are growing and predicted to go higher by
>some. The news about reserves probably won't help. Is it possible that
>we will see that kind of runaway inflation again? How would that effect
>your predictions?
This is considered unlikely be many analysts.
First, oil overall makes less of an aggregate contribution to the aggregate
US production process today than it did back then, in large part due to the
shift in the US economy from manufacturing to services.
Secondly, firms in many oil-intensive industries have become much better at
manager their fuel supplies and price shocks in fuel through the use of
options, reserves, and futures contracts.
Thirdly, OPEC oil suppliers largely regard the high prices of the 1970's as
being bad for themselves as well - as these high prices spurred oil
production in places like the North Sea and the North Slope that proved to
be long-term competitors to them. Thus, it is considered almost certain
that Saudi Arabia would open its oil taps in the event that prices start to
increase too much.
Fourth, the Federal Reserve would likely intervene with monetary policy to
keep inflation from going to high.....
Sorry to disappoint you.....
JDG
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John D. Giorgis - [EMAIL PROTECTED]
"The liberty we prize is not America's gift to the world,
it is God's gift to humanity." - George W. Bush 1/29/03
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