walkitout (walkitout) wrote,
walkitout
walkitout

Oil Prices and the Economy

I can never remember if I've posted about this. R. and I have been talking about it for probably a couple years now.

We spent a bunch of time, prior to buying the house we live in now, speculating about what might happen with jobs over the next decade or two and what that might mean for his commute. We figured it was quite possible that gas would get expensive enough that it would make sense to keep commute distance down, buy commute vehicle(s) that got good gas mileage and buy a house on public transport (in this case, a commuter rail line that has a good on time record). We also wanted the area to be walkable/bikeable to other services (school, shops, etc.) We figured this was going to be the house the kids attended k-12+ while living in so we weren't going to get a second shot at this decision. We have in no way regretted this decision.

When I was first trying to understand the implications of "peak oil" (that point at which you can't really increase supply any more, even tho plenty more remains available, and what remains is progressively more and more difficult to extract altho of course technology does improve the energy ratio might or might not improve), I get sucked into envisioning a persistently high oil price. However, after a lot more thinking and debating and discussing, R. and I concluded that oil prices would be a sort of check on the business cycle. That is, whenever the economy well and truly sucked, demand for energy would drop and thus, oil prices would drop as well. But whenever the economy tried to get frothy, a energy price spike would be a huge buzzkill, terminating the party before it even got properly started.

Articles like this:

http://www.bloomberg.com/news/2011-05-05/crude-gasoline-heating-oil-tumble-on-economy-oil-products.html

are strangely reassuring, because while the news is not good (the economy stumbling) it is also not bad (at least oil is cheaper). And the combination contributes to my smug self-satisfaction, because it confirms a theory I had.
Tags: economics, politics
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