Friday, May 30, 2008
Reference: Truth or consequences, Bangkok Post, May 29, 2008
Economic shocks caused by rising oil price work only in the short term and are illusory in the long term because the world economy is oil based. In the long term, the price shock causes inflation which eventually wipes out the gains to oil producers and the real cost to consumers. Each time the price has risen in the past, the pundits have told us that alternative energy sources and conservation measures would become economically feasible and deliver the world economy from its reliance on crude oil. It did seem that way for a while until inflation brought us back down to reality when the apparent price differentials disappeared. Your columnist's claim that $4 a gallon for gasoline in the USA is what it will take now in 2008 (Truth or consequences, Bangkok Post, May 29, 2008) is almost verbatim what the pundits were saying back in 1980 about $40 a barrel for crude oil. It did not happen then and it will not happen now.