OPEC Dollar Excuse for high oil prices debunked

CONGRESS OF THE UNITED STATES
JOINT ECONOMIC COMMITTEE

WASHINGTON, D.C. -- The OPEC oil cartel’s attempt to blame high oil prices on the lower foreign exchange value of the dollar is refuted in a new study released today by Congressman Jim Saxton, ranking Republican member of the Joint Economic Committee (JEC). The new staff study, The Dollar and Oil, analyzes a number of factors contributing to high oil prices, including the cartel’s supply restrictions and inadequate investments made by members of OPEC. As late as 2004, OPEC maintained a price target range of $22 to $28 per barrel. Despite sharply higher world demand and continual price pressures since, the cartel has continued to restrict its oil production even as prices surged well over $120 per barrel.

“The oil cartel always seems to have an opportunistic and disingenuous explanation for oil price increases at any point in time, and the foreign exchange value of the dollar is merely the latest excuse,” Saxton said. “Even with oil prices at sky-high levels, the head of OPEC recently asked, ‘Why should we invest in spare capacity that will not be used? We see plenty of spare capacity until 2020.’ Obviously, the OPEC cartel is quite satisfied with the current supply and demand conditions in the oil market.

“If OPEC were to ramp up its production capacity and produce more oil, oil prices would fall. The lifting cost of oil in the key Persian Gulf producing states is less than $5 per barrel, so the monopoly profits generated by the cartel’s supply restrictions are truly obscene at current market prices of oil. As the study notes, excessive oil prices caused by the cartel amount to an “OPEC tax” on already struggling economies around the world,” Saxton concluded.

08-4 Frontiers of Real-Time Data Analysis by Dean Croushore

Working Papers 2008: Abstracts

FRONTIERS OF REAL-TIME

Associate Professor of Economics and Rigsby Fellow
University of Richmond
Visiting Scholar
Federal Reserve Bank of Philadelphia
March 2008

This paper describes the existing research (as of February 2008) on real-time data analysis, divided into five areas: (1) data revisions; (2) forecasting; (3) monetary policy analysis; (4) macroeconomic research; and (5) current analysis of business and financial conditions. In each area, substantial progress has been made in recent years, with researchers gaining insight into the impact of data revisions. In addition, substantial progress has been made in developing better real-time data sets around the world. Still, additional research is needed in key areas, and research to date has uncovered even more fruitful areas worth exploring.

If you wish to download the WP08-4, please copy the link below into your browser:

http://www.philadelphiafed.org/files/wps/2008/wp08-4.pdf

Labor Market Weakness: won' t be improved by tax increases and protecsionism

April 4th, JOINT ECONOMIC COMMITTEE
SENATE OF UNITED STATES OF AMERICA

LABOR MARKET WEAKNESS: WON'T BE IMPROVED BY TAX INCREASES AND PROTECSIONISM
- Hoover Policy must be rejected -

by Senator Jim Saxton

WASHINGTON, D.C. -- Congress should not react to disappointing labor market figures and other economic data by enacting policies reminiscent of the Hoover Administration, Congressman Jim Saxton, ranking member of the Joint Economic Committee (JEC) said today. This morning, the Labor Department released data showing no statistically meaningful change in payroll employment in March and an increase of the unemployment rate to 5.1 percent. Recent weak economic data have led some to compare current economic policies to those of the Hoover Administration, without apparently knowing what the Hoover Administration’s policies actually were.

“Those who compare recent economic conditions and policies to those of the Hoover era should recall the mistakes made in the Revenue Act of 1932,” Saxton said today “Instead of reducing the tax burden, Congress passed and President Hoover signed into law steep increases in personal income tax rates, estate tax rates, and many other taxes.”

“As I have previously noted, the top personal income tax rate was raised from 25 percent in 1931 to 63 percent under the 1932 Act, more income was subjected to the income tax, and the estate tax burden was more than doubled. The salient provisions of the 1932 Act moved in exactly the opposite direction of the recent tax relief legislation passed in 2001, 2002, and 2003. However, many of the critics of the recent tax relief legislation advocate increases in taxes reminiscent of those contained in the 1932 Revenue Act, even as they exaggerate the degree of recent economic weakness by evoking the Great Depression.

“It is absurd to compare current economic conditions to those of the Hoover years, a time when the unemployment rate was as high as 24 percent. Unfortunately, there are Americans now experiencing unemployment and other difficulties, but these are nothing like the scale seen in the Great Depression

“It is especially ironic for those portraying the current economic situation in the darkest possible colors to advocate huge tax increases. If the economy were as weak as the critics contend, a tax increase would only repeat the destructive mistakes of the Hoover era. Tax increases impose additional economic costs on the economy in any phase of the business cycle, but would be particularly destructive at a time when the economic and employment outlook is fragile. Protectionism in addition to tax increases was demonstrated to be an especially lethal policy mix during the 1930s, but the majority in Congress seems oblivious to this fact,” Saxton concluded.

GOLD – Mirror on the Credit Crisis by Jeff Nichols

Monday, March 17, 2008


Regardless of gold’s short-term price swings – both up and down – as investors and speculators react to the unfolding credit crisis, one thing is certain: Down the road, six months or more, gold will benefit from the Federal Reserve running its printing press at high speed, hoping that easy money will solve the current crisis of confidence.


The Fed is trying to reassure financial markets that it stands ready to back up or bail out the big banks. But, so far, this has not worked – nor is it likely to as long as confidence is lacking in those at the nation’s economic helm and at the vulnerable banks and financial institutions.
The roots of today’s problem are years of excess, easy money, and lack of financial oversight. And now there is no easy way out.

Americans have been living beyond their means – as households and as a nation – for years, spending money we don’t have mostly for things we don’t need. Individually, we have been enjoying easy credit afforded us by the Fed and domestic lenders. As a nation, we have counted on the willingness of foreign central banks to finance our spending and our wars by accumulating more and more of our debt.


Printing more money may postpone the day of reckoning but won’t avoid it. This is what the U.S. central bank tried in the 1970s – but, in the end, we just had more inflation, higher interest rates, and a more painful economic adjustment.


Today, we see easy money cheapening the U.S. dollar as the exchange rate vis-à-vis the euro, for example, falls progressively to new historic lows. The flip side of this depreciating coin is higher prices for oil and agricultural commodities – making it more expensive for all of us to drive our cars, heat our homes and office buildings, and feed our families. These are the early signs of a more endemic inflation down the road


We expect the price of gold to continue moving higher with big swings – up and down – around a rising trend. A gain of another 10 or 20 percent in the months ahead seems increasingly likely. And, with the right confluence of economic and geopolitical developments we could see gold spike to US$1500 or US$2000 or even higher in the next few years.


Jeffrey Nichols
Managing Director
AMERICAN PRECIOUS METALS ADVISORS
Office: 914-737-6655 / cell: 914-907-2022 /
email: JNichols@MetalsAdvisors.com

Welcome

Welcome to the Blog Economist of the World. This blog continue the relationship started in Linkedin. A group for Economist around the world where we can comment the Economics Perspectives and Economic Theory and make a Community of this excellent profession.

Is true that the Group is for Economist, but Financial Managers, IT Managers and Financial Accounting have a place with us and are welcome.

Á la mémoire de mon père, Ingénieur Alfredo Jesús Gil y Gil. Merci beaucoup.