 |
|
Oil is pretty unique with respect to the impact of price cha
Posted on: August 17, 2018 at 15:09:48 CT
JeffB MU
Posts:
72394
Member For:
21.45 yrs
Level:
User
M.O.B. Votes:
0
nges on the economy.
With many other commodities consumers have the ability to choose from viable alternatives on a relatively short time frame, or to reduce demand for the item in other ways, or even to do without it altogether.
If the price of eggs, or chicken, or beef, or fish, or potatoes or whatever go up, people can cut back relatively easily. If the price of cars jumps up, people can wait longer to buy a new car or buy one with less features if they want to stay within their same budget.
With fuel, people can cut back some, of course, but if prices double, consumers will probably not cut their consumption in half, nor even close to it... at least not in the short run. They will typically pay more for fuel that year and cut back elsewhere, whether on savings or purchases or even going into debt.
I remember during the loooong run up in prices leading up to the crash in 2007/08 when figures were given for how many billions of dollars were taken out of consumers' pockets by every 10 cent increase in gas prices... or whatever. The specific numbers aren't as important here as the concept. It is a major drain on the economy. But it's a huge economy, of course.
Economists were warning about the impact of the rising prices for years, but the naysayers and some economists were laughing at them as the bubble continued to grow despite their warnings. Each year had them thumping their chests even harder. Until the bubble finally popped and panic set in.
Bubbles are notoriously impossible to predict as to when they will finally pop. It can be many years.
I think we're in one right now. But even if that is true, our economy could grow in a seemingly perfect Goldilocks environment for years before catastrophe strikes.
With many other commodities consumers have the ability to choose from viable alternatives on a relatively short time frame, or to reduce demand for the item in other ways, or even to do without it altogether.
If the price of eggs, or chicken, or beef, or fish, or potatoes or whatever go up, people can cut back relatively easily. If the price of cars jumps up, people can wait longer to buy a new car or buy one with less features if they want to stay within their same budget.
With fuel, people can cut back some, of course, but if prices double, consumers will probably not cut their consumption in half, nor even close to it... at least not in the short run. They will typically pay more for fuel that year and cut back elsewhere, whether on savings or purchases or even going into debt.
I remember during the loooong run up in prices leading up to the crash in 2007/08 when figures were given for how many billions of dollars were taken out of consumers' pockets by every 10 cent increase in gas prices... or whatever. The specific numbers aren't as important here as the concept. It is a major drain on the economy. But it's a huge economy, of course.
Economists were warning about the impact of the rising prices for years, but the naysayers and some economists were laughing at them as the bubble continued to grow despite their warnings. Each year had them thumping their chests even harder. Until the bubble finally popped and panic set in.
Bubbles are notoriously impossible to predict as to when they will finally pop. It can be many years.
I think we're in one right now. But even if that is true, our economy could grow in a seemingly perfect Goldilocks environment for years before catastrophe strikes.
Please explain why this message is being reported.
MESSAGE THREAD
Oil is pretty unique with respect to the impact of price cha - JeffB MU - 8/17 15:09:48