Re: oil and the new economy

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

At 08:26 AM 9/19/00 -0700, you wrote:
> What has happened to the claim that the New Economy is no longer very
> sensitive to oil prices?

I don't know, but the US doesn't import as much oil as it used to (relative
to GDP).

BTW, I graphed the real price of energy (CPI for energy divided by the
over-all CPI-U) for my students, using July 2000 as a stand-in for the
whole year. Two things are notable: (a) the real price is still much  lower
than in the 1970s or early 1980s, in the same range as in the 1960s; and
(b) the rise of the real price has been very steep during the last two
years, especially going from 1999 to July 2000.

In terms of percentages, the rise from 1999 to July 2000 is of the same
magnitude as the "energy crisis" years of the 1970s. However, the use of
July to represent the whole year probably encourages extreme results. Also,
energy prices wouldn't just include oil prices, but also electricity
prices, which were deregulated in some or most of California.

Finally, it's important to note that the real energy price fell drastically
from 1997 to 1998. Is it accurate to say that recent price hikes are partly
or a response to the fall in energy prices a couple of years ago, the way
Saddam's invasion of Kuwait was partly a response to low oil prices in the
late 1980s?

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine