Analysis of current economic conditions and policy
Sanctions, energy prices, and the world economy
I gave an online talk today hosted by Princeton University discussing sanctions, energy prices, and the world economy. Here are links to the video and slides.
36 thoughts on “Sanctions, energy prices, and the world economy”
pgl
Did I hear this right – the Koch Brothers and their vast private companies are still doing business in Russia. Of course these brothers used to build refineries for Hitler and for Stalin so business as usual as they support Putin the war criminal. And of course they also fund Bruce Hall’s favorite energy “experts” – IER!
Anonymous
one of the benefits of detente and the fall of the iron curtain was ford model a enthusiasts in russia could share knowledge and parts with americans…..
henry ford was building model a automobile and ford truck plants in russia through the 20’s and 30’s…..
pgl
“henry ford was building model a automobile and ford truck plants in russia through the 20’s and 30’s”
Well yea but Lenin was not invading his neighbors committing all sorts of war crimes. Putin is.
Baffling
And in the 2000s putin is invading his neighbors and slaughtering civilians. Funny how quickly a country can turn bad.
In a recent post someone with your name said Ukraine had been part of Russia for “500 years.”
That Bruce Hall was schooled on Ukraine by Dr. Rosser and others.
Based on which Bruce Hall is responding, Stalin either murdered a few million (more) of those who had been Russians for 500 years or he invaded Ukraine and wreaked havoc, especially on independent Ukrainian farmers who had no connection to Russia.
You should definitely report your findings to the other Bruce Hall who was clearly uneducated and out of touch while pontificating on a subject he knows little about.
Dr. Dysmalist
“the undercurrent theme that Stalin was a good guy”
No, nitwit, that was not an undercurrent of Baffling’s comment. Only someone who is intellectually and ideologically blinkered insists on seeing every issue as a binary. Because he(?) has a history of being an intelligent, knowledgeable, and good faith commenter, I have no doubt that Baffling is very aware of the Holodomor.
I realize this comment is of a kind with most of yours lately, but is in remarkably bad faith. If you want to be taken seriously, stop with the bad faith. It undermines everything you want to say. I think that you can be better than that.
And to many of you, (thank you)^n for trying to, and mostly succeeding in, keeping the level of commentary up close to the level of the original posts. Keep up the good faith and good work. But please, please, please stop feeding the trolls, especially the two who seem to demonstrate psychological/psychiatric problems. They’re not here to learn anything, so ignore them.
Bruce Hall
Noneconomist,
Good try, but not good enough.
After a 1648 rebellion of the Cossacks against the Polish–Lithuanian Commonwealth, Hetman Bohdan Khmelnytsky agreed to the Treaty of Pereyaslav in January 1654. The exact nature of the relationship established by this treaty between the Cossack Hetmanate and Russia remains a matter of scholarly controversy.[5] The agreement precipitated the Russo-Polish War of 1654–67. In consequence, by the Treaty of Perpetual Peace, signed in 1686, the eastern portion of Ukraine (east of the Dnieper River) was to come under Russian rule,[6] 146,000 rubles were to be paid to Poland as compensation for the loss of the Right Bank of Ukraine,[7] and the parties agreed not to sign a separate treaty with the Ottoman Empire.[7] The treaty was strongly opposed in Poland and was not ratified by the Polish–Lithuanian Sejm (parliament) until 1710.[7][8] The legal legitimacy of its ratification has been disputed.[9] According to Jacek Staszewski, the treaty was not confirmed by a resolution of the Sejm until its 1764 session.[10]
Ukraine has had its own identity, but not necessarily independence. Even Stalin recognized the Ukrainian identity as distinct from Russian identity which is why he had no qualms about his actions to create the Holodomor.
So, I can be correct about Ukraine being part of Russia for 500 years and still be correct that it had its own identity and was subjected to Russian atrocities.
Do you still object to facts?
Bruce Hall
Dr. Dre,
No, nitwit, that was not an undercurrent of Baffling’s comment.
A bit slow on the uptake, eh? Can’t recognize the sarcasm in the comment about sarcasm?
Anonymous
thank you for sharing this!
Ivan
The main substitution for gasoline is electric cars. If we could keep oil at $80-100, we would give the shift away from combustion engines a solid push.
The main substitution for natural gas is energy efficient homes, it takes longer but the push toward insulation of homes will be helped by higher natural gas prices.
Steven Kopits
You’re talking about reducing US oil consumption, Ivan. US oil consumption fell and held a lower plateau from 2011-2014 at WTI spot averaging a little under $100. So if you want to reduce oil consumption again, you’re pretty much talking about a recession preceded by WTI in the $135-145 range in current dollars. That would reduce US oil consumption, but of course, not by 100%, but by about 1.5 mbpd, back to the 18.8 mbpd range which prevailed in the 2011to mid-2014 period, versus about 20.3 mbpd we’ve seen in the last six months. So, figure $145 WTI leads to a stiff recession and an oil consumption reduction of 7.5% or 1.5 mbpd.
That’s where the numbers take you.
Pretty ugly, though.
Ivan
The consumer financial calculation on combustion vs. electric is very sensitive to the current and predicted future price of gas. It is basically a calculation of the higher purchase price (a much smaller number today than then) vs. the lower lifetime operation cost for the EV (highly dependent on the cost per gallon of gas). That very simple calculation is very sensitive to the price of gas (oil). So the purchase of EVs are slowed by cheep gas and increased by expensive gas. The “higher oil price -> more EV sales” basic market principle holds true regardless of where the price of oil is and whether other issues influence desirability of one vs, the other.
pgl
“You’re talking about reducing US oil consumption, Ivan. US oil consumption fell and held a lower plateau from 2011-2014 at WTI spot averaging a little under $100. So if you want to reduce oil consumption again, you’re pretty much talking about a recession preceded by WTI in the $135-145 range in current dollars.
Huh! We did not experience a recession from 2011 to 2014. We did experience the normal movement along the demand curve. Please stop confusing basic microeconomics v, basic macroeconomics.
Steven Kopits
“Secular stagnation” was the phrased used in the US, and Europe was in recession for most of this period.
The US was not in recession because it’s oil production was increasing during this period.
If you believe this model, then oil shocks work through the need to rebalance the current account. The oil importing nations need to devalue their currency to reduce imports, notably but not exclusively of crude oil, and thereby return the current account to sustainable levels.
Let’s take Greece as an example. It imports all of its oil. Its main export is tourism, which is oil intensive via airline tickets. If the price of oil goes up, tourism falls and oil imports go up. The natural response would be to devalue the currency and improve the competitiveness of Greek tourism and other exports to make up for higher oil prices. However, in the case of Greece, the Euro is deemed a proxy for Europe and membership in first tier countries, because otherwise Greece is not a first tier country. But if Greece can’t devalue, then the economy will go into more or less perma-recession which it (and Italy) did, and from which it (and Italy) is yet to recover. To use numbers (in $2017 Intl, PPP / capita): Italy’s per cap GDP in PPP terms is no higher than 1999; Greece no higher than 2000. Greece’s per cap GDP PPP is 23% below 2008 (!) and Italy is 9% below 2008. That’s what Euro membership is worth!
If you believe my approach, then you’ll take objection to Jim’s analysis. Remember, in 2008, we imported 60% of our crude oil consumption. Today were are net oil independent (and net energy independent across the board). Therefore, our current account is neutral with respect to the oil price and therefore an oil shock should not send the US into recession. Rather, we will see sectional recessions, with the mid-continent printing money and the coasts sucking pond water. But remember, the establishment lives on the coasts, so that’s what matters to the NYT and WaPo. Here, the recession might be quite stiff because, like Greece, New York is in a currency union with Texas and cannot devalue. Therefore, the downturn may be prolonged on the coasts even as the mid-continent enjoys a boom.
Barkley Rosser
Steven,
You usually avoid blatant factual errors, but you have some in this statement. It is simply false that the only reason there was positive GDP growth in the US during 2011-14 was due to rising oil production.
As for Europe, you singled out the two worst laggards, with Greece infamously having a massive financial crisis i 2011 that was followed by many years of negative growth. Italy was mostly just stagnant, with some years of minor declines. But the vast majority of EU nations had positive growth during this period, if not all that rapid. The high oil prices almost certainly contributed to the drag going on.
An irony is that right now the PIGS nations that were so poorly performing back then and suffering various financial problems are now the most rapidly growing economies in the EU. It is not obvious why this is so, but it is. The Economist had a cartoon showing a bunch of winged pigs flying in connection with a story on this recently.
Steven Kopits
Barkley –
From the CEPR:
The Committee released its findings [that] reflect data publicly available as of 15 September 2015. The committee declared that the trough of the recession that started after the 2011Q3 peak has been reached in 2013Q1. The trough signals the end of the second recession witnessed by the euro area after the financial crisis. The recession lasted six quarters; the 2011Q3-peak to 2013Q1-trough cumulative decline in output has been a mild 1.5 percent.
This was a brutal six quarter recession in Europe as a whole, not merely the PIGS. What was occurring during this period? Oil prices were running at $100+. Scott Sumner attributes this brutal downturn to a 0.25% interest rate hike. I don’t think so.
In the US. I think it’s pretty clear we would have been in recession without shale oil production. Like the Europeans, we would have had to reduce our oil consumption. As it was, until 2015, all of rising US oil production was effectively exported.
In numbers: U.S. Field Production of Crude Oil (MCRFPUS2) on a TMMA basis bottomed in December 2008 at 5 million barrels per day. From there it started to grow, reaching 9 mbpd in early 2015. You’ll recall from above that US oil consumption did not begin to grow until 2015. Therefore, the 4 mbpd increment was entirely exported. We were able to balance the trade effect through import substitution. Rather than reducing our own consumption, we produced more oil and sent it abroad.
Without this stunning increase in oil production, the US would have had to reduce its own oil consumption, something which historically is associated with recessions.
Steven Kopits
I don’t see this PIGS story, at least not for Italy and Greece, of which I was writing. Per cap GDP, whether measured in constant local currency or Int 2017$ PPP basis both look essentially lifeless, all but indistinguishable from, say, Hungary or a number of other CE countries. The IMF is projecting growth, sure, but that’s not banked yet.
Princeton Steve certainly does not know what Alvin Hansen meant by secular stagnation as this total know nothing provides some dumb quote that it means a period of slow growth. No – Alvin Hansen was much more than observing growth rates being low but offering a coherent economic hypothesis as to why such a development might be expected. Of course we have seen enough from Princeton Steve to know he has no clue macroeconomics is even about.
Barkley Rosser
Steven,
OK, I grant that the EU had a recession during 2012 plus the quarter before and the quarter after. But this followed growth of 2 percent per year during 2010 and 2011 (including that final quarter). Sorry, but your oil price argument does not cut it. Oil prices were over $100 for the much longer period than just 2012. What happened in 2012? It was the aftermath of the major financial crisis that hit the EU in 2011 that was centered on Greece. That interest rate increase the often out-of-it Sumner cites is only a small part of what went on. Again, most of the decline was centered on the PIGS, which experienced severe declines. Germany, France, and UK all had positive GDP growth rates in 2012.
You also made the bizarre claim that the only reason US had positive growth in the period was rising oil production. That is blatantly false.
Steven Kopits
You are correct. Let me clarify the sentence:
US oil consumption, on a TMMA basis, peaked in August 2005 at 20.9 mbpd and eased back to 20.7 mbpd in Dec. 2007. With the onset of recession, US oil consumption fell precipitously, bottoming at 18.8 mbpd in Nov. 2009, a reduction in consumption of 2.1 mbpd compared to the 2005 peak. Consumption remained in this range for five years, that is, until early 2015, when low oil prices from the shale revolution began to stimulate demand growth in the US once again. Consumption gradually recovered to 20.5 mbpd in late 2019, only to plunge again with the onset of the pandemic. US oil consumption has yet to regain its 2005 peak, and indeed, is only 0.9 mbpd higher than the prior peak of 18.9 mbpd set in April 1979.
We all happy now?
pgl
You have no clue what people meant with “secular stagnation”, which is evident from that babble you just wrote. Steve – please stop using terms you clearly do not understand.
Steven Kopits
For those like pgl who do not know what secular stagnation is:
The term “secular stagnation” refers to a state of little or no economic growth – in other words, an environment where the economy is essentially stagnant. “Secular” in this context simply means “long term.” The term was coined by Alvin Hansen in the 1930s, during the Great Depression, and was revived largely by Lawrence Summers.
By the way, if secular stagnation was coined during the Great Depression and revived during the Great Recession, doesn’t that suggest the GR was in fact a depression?
Bruce Hall
Good news, Ivan. The Biden Administration is going to encourage gas and oil exploration on federal lands as long as the “climate change catastrophe fee” is increased five times. https://www.yahoo.com/news/biden-administration-says-resume-plans-165854221.html Then earlier this week, a federal appeals court allowed the government to continue, temporarily, using the value of around $50 per ton of greenhouse gases emitted. The White House had reverted back to an Obama-era value, which is far higher than the roughly $10 a ton imposed by the Trump administration, early last year.
SecondLook
The main substitution for natural gas is energy-efficient homes, it takes longer but the push toward insulation of homes will be helped by higher natural gas prices.
The main substitution would be an all-electric home. Quite feasible, but the upfront expenses will be a major brake for decades.
A side benefit of going purely electric: less house pollution. Yes, using a gas range, etc. generates pollution within a building
Barkley Rosser
SL,
Solar panels would help.
Ulenspiegel
“The main substitution would be an all-electric home. ”
To run a heat pump efficiently in a colder region requires low system temperatures, i.e. insulation is a requirement. A nice by-product is of course that cooling in summer is quite easy.
Ivan
Also let’s not forget that a lot of electricity is made from natural gas. So switching from NG heating to electrical heating may not reduce NG use that much. At the utility level the substitution for NG is alternative energy. Solar and wind would get a boast if NG prices go up.
Bruce Hall
Also let’s not forget that a lot of electricity is made from natural gas. So switching from NG heating to electrical heating may not reduce NG use that much.
Well, Ivan, that would be quite a trick to convert the stored energy of natural gas to instantaneous electrical power and then to heat through compression and actually save energy relative to directly burning natural gas in 97% efficient furnaces. https://www.energystar.gov/products/most_efficient/furnaces
I believe what you are suggesting is called a fool’s errand.
Of course, if you are proposing that the electricity is going to be generated by wind and solar energy, then you’d better get that insulation well above R49 for the period when electricity is not being generated by those sources. My home has R49 attic insulation and blown in cellulose in the 2×6 framed walls. My normal bill is about $120 during the winter, but this February was extraordinarily cold so it got up to $160. You can only do so much with insulation and a high efficiency furnace.
Conventional heat pumps lose a lot of efficiency below 25ºF. So for your suggestion to have merit for the northern tier states, they would have to be geothermal heat pumps which, in the words of my neighbor who doesn’t speak English well, “very spensee” (Iranian).
Since a geothermal unit cost anywhere from $15,000 to $35,000 depending on terrain and size, that’s a lot of cost to recover versus a natural gas high efficiency furnace which run about $4,000 to $7,000. The only reason to select a heat pump over natureal gas is if the government successfully raises the price of natural gas through the fantasy policy of “saving the planet”. Then we will have a lot of people who suffer needlessly because of the people for whom they voted.
Stupidity has its own rewards.
Ulenspiegel
“Well, Ivan, that would be quite a trick to convert the stored energy of natural gas to instantaneous electrical power and then to heat through compression and actually save energy relative to directly burning natural gas in 97% efficient furnaces.”
Look, Bruce, do not talk about thermodynamics, it is three levels about your IQ. I will try to keep it simple for you:
A CCNG power plant has an electric efficiency of 50-60%, a modern heat pump extrects from the environment four units of heat with one unit of electricity powering the compressor. Therefore, you can cut the demand for NG by 50%. And to add to your confusion, there are also NG heat pumps which give for one thermal unit around 1.5 units heat.
Of course, a much higher impact is observed if the electricity comes from wind turbines.
“Since a geothermal unit cost anywhere from $15,000 to $35,000 ”
Only an idiot pays 35.000 USD for a heat pump system. If have paid 11 000 USD for a system with ground collector which runs more economically than a NG system.
Bruce Hall just praised Donald Trump for setting the charge for greenhouse emissions at an incredibly low $10 per ton and has ridiculed Biden for raising it to a more appropriate $50 per ton. Now we all know Bruce Hall has never bothered to think about the economics of anything but I thought I would provide this link discussing the issues. Take a look folks even as we know Kelly Anne Conway has banned Brucie from reading intelligent discussions.
joseph
Bruce Hall: “Well, Ivan, that would be quite a trick to convert the stored energy of natural gas to instantaneous electrical power and then to heat through compression and actually save energy relative to directly burning natural gas in 97% efficient furnaces.”
Obviously Bruce knows nothing of the laws of thermodynamics. It turns out that an electric air source heat pump can transfer more than three times as much heat energy as the energy needed to run it. So if the natural gas power plant is 50% efficient and the home electric heat pump is 300% efficient, the output of the combination is 150%, which is better than a 97% efficient gas furnace. No tricks, no magic involved, just elementary science — which is a foreign language to Bruce.
Did I hear this right – the Koch Brothers and their vast private companies are still doing business in Russia. Of course these brothers used to build refineries for Hitler and for Stalin so business as usual as they support Putin the war criminal. And of course they also fund Bruce Hall’s favorite energy “experts” – IER!
one of the benefits of detente and the fall of the iron curtain was ford model a enthusiasts in russia could share knowledge and parts with americans…..
henry ford was building model a automobile and ford truck plants in russia through the 20’s and 30’s…..
“henry ford was building model a automobile and ford truck plants in russia through the 20’s and 30’s”
Well yea but Lenin was not invading his neighbors committing all sorts of war crimes. Putin is.
And in the 2000s putin is invading his neighbors and slaughtering civilians. Funny how quickly a country can turn bad.
Baffling, that was good sarcasm with the undercurrent theme that Stalin was a good guy because he didn’t invade his neighbors and commit war crimes.
https://www.history.com/news/ukrainian-famine-stalin
In a recent post someone with your name said Ukraine had been part of Russia for “500 years.”
That Bruce Hall was schooled on Ukraine by Dr. Rosser and others.
Based on which Bruce Hall is responding, Stalin either murdered a few million (more) of those who had been Russians for 500 years or he invaded Ukraine and wreaked havoc, especially on independent Ukrainian farmers who had no connection to Russia.
You should definitely report your findings to the other Bruce Hall who was clearly uneducated and out of touch while pontificating on a subject he knows little about.
“the undercurrent theme that Stalin was a good guy”
No, nitwit, that was not an undercurrent of Baffling’s comment. Only someone who is intellectually and ideologically blinkered insists on seeing every issue as a binary. Because he(?) has a history of being an intelligent, knowledgeable, and good faith commenter, I have no doubt that Baffling is very aware of the Holodomor.
I realize this comment is of a kind with most of yours lately, but is in remarkably bad faith. If you want to be taken seriously, stop with the bad faith. It undermines everything you want to say. I think that you can be better than that.
And to many of you, (thank you)^n for trying to, and mostly succeeding in, keeping the level of commentary up close to the level of the original posts. Keep up the good faith and good work. But please, please, please stop feeding the trolls, especially the two who seem to demonstrate psychological/psychiatric problems. They’re not here to learn anything, so ignore them.
Noneconomist,
Good try, but not good enough.
After a 1648 rebellion of the Cossacks against the Polish–Lithuanian Commonwealth, Hetman Bohdan Khmelnytsky agreed to the Treaty of Pereyaslav in January 1654. The exact nature of the relationship established by this treaty between the Cossack Hetmanate and Russia remains a matter of scholarly controversy.[5] The agreement precipitated the Russo-Polish War of 1654–67. In consequence, by the Treaty of Perpetual Peace, signed in 1686, the eastern portion of Ukraine (east of the Dnieper River) was to come under Russian rule,[6] 146,000 rubles were to be paid to Poland as compensation for the loss of the Right Bank of Ukraine,[7] and the parties agreed not to sign a separate treaty with the Ottoman Empire.[7] The treaty was strongly opposed in Poland and was not ratified by the Polish–Lithuanian Sejm (parliament) until 1710.[7][8] The legal legitimacy of its ratification has been disputed.[9] According to Jacek Staszewski, the treaty was not confirmed by a resolution of the Sejm until its 1764 session.[10]
Ukraine has had its own identity, but not necessarily independence. Even Stalin recognized the Ukrainian identity as distinct from Russian identity which is why he had no qualms about his actions to create the Holodomor.
So, I can be correct about Ukraine being part of Russia for 500 years and still be correct that it had its own identity and was subjected to Russian atrocities.
Do you still object to facts?
Dr. Dre,
No, nitwit, that was not an undercurrent of Baffling’s comment.
A bit slow on the uptake, eh? Can’t recognize the sarcasm in the comment about sarcasm?
thank you for sharing this!
The main substitution for gasoline is electric cars. If we could keep oil at $80-100, we would give the shift away from combustion engines a solid push.
The main substitution for natural gas is energy efficient homes, it takes longer but the push toward insulation of homes will be helped by higher natural gas prices.
You’re talking about reducing US oil consumption, Ivan. US oil consumption fell and held a lower plateau from 2011-2014 at WTI spot averaging a little under $100. So if you want to reduce oil consumption again, you’re pretty much talking about a recession preceded by WTI in the $135-145 range in current dollars. That would reduce US oil consumption, but of course, not by 100%, but by about 1.5 mbpd, back to the 18.8 mbpd range which prevailed in the 2011to mid-2014 period, versus about 20.3 mbpd we’ve seen in the last six months. So, figure $145 WTI leads to a stiff recession and an oil consumption reduction of 7.5% or 1.5 mbpd.
That’s where the numbers take you.
Pretty ugly, though.
The consumer financial calculation on combustion vs. electric is very sensitive to the current and predicted future price of gas. It is basically a calculation of the higher purchase price (a much smaller number today than then) vs. the lower lifetime operation cost for the EV (highly dependent on the cost per gallon of gas). That very simple calculation is very sensitive to the price of gas (oil). So the purchase of EVs are slowed by cheep gas and increased by expensive gas. The “higher oil price -> more EV sales” basic market principle holds true regardless of where the price of oil is and whether other issues influence desirability of one vs, the other.
“You’re talking about reducing US oil consumption, Ivan. US oil consumption fell and held a lower plateau from 2011-2014 at WTI spot averaging a little under $100. So if you want to reduce oil consumption again, you’re pretty much talking about a recession preceded by WTI in the $135-145 range in current dollars.
Huh! We did not experience a recession from 2011 to 2014. We did experience the normal movement along the demand curve. Please stop confusing basic microeconomics v, basic macroeconomics.
“Secular stagnation” was the phrased used in the US, and Europe was in recession for most of this period.
The US was not in recession because it’s oil production was increasing during this period.
If you believe this model, then oil shocks work through the need to rebalance the current account. The oil importing nations need to devalue their currency to reduce imports, notably but not exclusively of crude oil, and thereby return the current account to sustainable levels.
Let’s take Greece as an example. It imports all of its oil. Its main export is tourism, which is oil intensive via airline tickets. If the price of oil goes up, tourism falls and oil imports go up. The natural response would be to devalue the currency and improve the competitiveness of Greek tourism and other exports to make up for higher oil prices. However, in the case of Greece, the Euro is deemed a proxy for Europe and membership in first tier countries, because otherwise Greece is not a first tier country. But if Greece can’t devalue, then the economy will go into more or less perma-recession which it (and Italy) did, and from which it (and Italy) is yet to recover. To use numbers (in $2017 Intl, PPP / capita): Italy’s per cap GDP in PPP terms is no higher than 1999; Greece no higher than 2000. Greece’s per cap GDP PPP is 23% below 2008 (!) and Italy is 9% below 2008. That’s what Euro membership is worth!
If you believe my approach, then you’ll take objection to Jim’s analysis. Remember, in 2008, we imported 60% of our crude oil consumption. Today were are net oil independent (and net energy independent across the board). Therefore, our current account is neutral with respect to the oil price and therefore an oil shock should not send the US into recession. Rather, we will see sectional recessions, with the mid-continent printing money and the coasts sucking pond water. But remember, the establishment lives on the coasts, so that’s what matters to the NYT and WaPo. Here, the recession might be quite stiff because, like Greece, New York is in a currency union with Texas and cannot devalue. Therefore, the downturn may be prolonged on the coasts even as the mid-continent enjoys a boom.
Steven,
You usually avoid blatant factual errors, but you have some in this statement. It is simply false that the only reason there was positive GDP growth in the US during 2011-14 was due to rising oil production.
As for Europe, you singled out the two worst laggards, with Greece infamously having a massive financial crisis i 2011 that was followed by many years of negative growth. Italy was mostly just stagnant, with some years of minor declines. But the vast majority of EU nations had positive growth during this period, if not all that rapid. The high oil prices almost certainly contributed to the drag going on.
An irony is that right now the PIGS nations that were so poorly performing back then and suffering various financial problems are now the most rapidly growing economies in the EU. It is not obvious why this is so, but it is. The Economist had a cartoon showing a bunch of winged pigs flying in connection with a story on this recently.
Barkley –
From the CEPR:
The Committee released its findings [that] reflect data publicly available as of 15 September 2015. The committee declared that the trough of the recession that started after the 2011Q3 peak has been reached in 2013Q1. The trough signals the end of the second recession witnessed by the euro area after the financial crisis. The recession lasted six quarters; the 2011Q3-peak to 2013Q1-trough cumulative decline in output has been a mild 1.5 percent.
This was a brutal six quarter recession in Europe as a whole, not merely the PIGS. What was occurring during this period? Oil prices were running at $100+. Scott Sumner attributes this brutal downturn to a 0.25% interest rate hike. I don’t think so.
https://cepr.org/content/euro-area-business-cycle-dating-committee-announcements
In the US. I think it’s pretty clear we would have been in recession without shale oil production. Like the Europeans, we would have had to reduce our oil consumption. As it was, until 2015, all of rising US oil production was effectively exported.
In numbers: U.S. Field Production of Crude Oil (MCRFPUS2) on a TMMA basis bottomed in December 2008 at 5 million barrels per day. From there it started to grow, reaching 9 mbpd in early 2015. You’ll recall from above that US oil consumption did not begin to grow until 2015. Therefore, the 4 mbpd increment was entirely exported. We were able to balance the trade effect through import substitution. Rather than reducing our own consumption, we produced more oil and sent it abroad.
Without this stunning increase in oil production, the US would have had to reduce its own oil consumption, something which historically is associated with recessions.
I don’t see this PIGS story, at least not for Italy and Greece, of which I was writing. Per cap GDP, whether measured in constant local currency or Int 2017$ PPP basis both look essentially lifeless, all but indistinguishable from, say, Hungary or a number of other CE countries. The IMF is projecting growth, sure, but that’s not banked yet.
Do your own numbers, October WEO
https://www.imf.org/en/Publications/WEO/weo-database/2021/October
https://developingeconomics.org/2018/09/21/secular-stagnation-short-term-fixes-for-long-term-problems/
Princeton Steve certainly does not know what Alvin Hansen meant by secular stagnation as this total know nothing provides some dumb quote that it means a period of slow growth. No – Alvin Hansen was much more than observing growth rates being low but offering a coherent economic hypothesis as to why such a development might be expected. Of course we have seen enough from Princeton Steve to know he has no clue macroeconomics is even about.
Steven,
OK, I grant that the EU had a recession during 2012 plus the quarter before and the quarter after. But this followed growth of 2 percent per year during 2010 and 2011 (including that final quarter). Sorry, but your oil price argument does not cut it. Oil prices were over $100 for the much longer period than just 2012. What happened in 2012? It was the aftermath of the major financial crisis that hit the EU in 2011 that was centered on Greece. That interest rate increase the often out-of-it Sumner cites is only a small part of what went on. Again, most of the decline was centered on the PIGS, which experienced severe declines. Germany, France, and UK all had positive GDP growth rates in 2012.
You also made the bizarre claim that the only reason US had positive growth in the period was rising oil production. That is blatantly false.
You are correct. Let me clarify the sentence:
US oil consumption, on a TMMA basis, peaked in August 2005 at 20.9 mbpd and eased back to 20.7 mbpd in Dec. 2007. With the onset of recession, US oil consumption fell precipitously, bottoming at 18.8 mbpd in Nov. 2009, a reduction in consumption of 2.1 mbpd compared to the 2005 peak. Consumption remained in this range for five years, that is, until early 2015, when low oil prices from the shale revolution began to stimulate demand growth in the US once again. Consumption gradually recovered to 20.5 mbpd in late 2019, only to plunge again with the onset of the pandemic. US oil consumption has yet to regain its 2005 peak, and indeed, is only 0.9 mbpd higher than the prior peak of 18.9 mbpd set in April 1979.
We all happy now?
You have no clue what people meant with “secular stagnation”, which is evident from that babble you just wrote. Steve – please stop using terms you clearly do not understand.
For those like pgl who do not know what secular stagnation is:
The term “secular stagnation” refers to a state of little or no economic growth – in other words, an environment where the economy is essentially stagnant. “Secular” in this context simply means “long term.” The term was coined by Alvin Hansen in the 1930s, during the Great Depression, and was revived largely by Lawrence Summers.
https://corporatefinanceinstitute.com/resources/knowledge/economics/secular-stagnation/
By the way, if secular stagnation was coined during the Great Depression and revived during the Great Recession, doesn’t that suggest the GR was in fact a depression?
Good news, Ivan. The Biden Administration is going to encourage gas and oil exploration on federal lands as long as the “climate change catastrophe fee” is increased five times.
https://www.yahoo.com/news/biden-administration-says-resume-plans-165854221.html
Then earlier this week, a federal appeals court allowed the government to continue, temporarily, using the value of around $50 per ton of greenhouse gases emitted. The White House had reverted back to an Obama-era value, which is far higher than the roughly $10 a ton imposed by the Trump administration, early last year.
The main substitution for natural gas is energy-efficient homes, it takes longer but the push toward insulation of homes will be helped by higher natural gas prices.
The main substitution would be an all-electric home. Quite feasible, but the upfront expenses will be a major brake for decades.
A side benefit of going purely electric: less house pollution. Yes, using a gas range, etc. generates pollution within a building
SL,
Solar panels would help.
“The main substitution would be an all-electric home. ”
To run a heat pump efficiently in a colder region requires low system temperatures, i.e. insulation is a requirement. A nice by-product is of course that cooling in summer is quite easy.
Also let’s not forget that a lot of electricity is made from natural gas. So switching from NG heating to electrical heating may not reduce NG use that much. At the utility level the substitution for NG is alternative energy. Solar and wind would get a boast if NG prices go up.
Also let’s not forget that a lot of electricity is made from natural gas. So switching from NG heating to electrical heating may not reduce NG use that much.
Well, Ivan, that would be quite a trick to convert the stored energy of natural gas to instantaneous electrical power and then to heat through compression and actually save energy relative to directly burning natural gas in 97% efficient furnaces.
https://www.energystar.gov/products/most_efficient/furnaces
I believe what you are suggesting is called a fool’s errand.
Of course, if you are proposing that the electricity is going to be generated by wind and solar energy, then you’d better get that insulation well above R49 for the period when electricity is not being generated by those sources. My home has R49 attic insulation and blown in cellulose in the 2×6 framed walls. My normal bill is about $120 during the winter, but this February was extraordinarily cold so it got up to $160. You can only do so much with insulation and a high efficiency furnace.
Conventional heat pumps lose a lot of efficiency below 25ºF. So for your suggestion to have merit for the northern tier states, they would have to be geothermal heat pumps which, in the words of my neighbor who doesn’t speak English well, “very spensee” (Iranian).
Since a geothermal unit cost anywhere from $15,000 to $35,000 depending on terrain and size, that’s a lot of cost to recover versus a natural gas high efficiency furnace which run about $4,000 to $7,000. The only reason to select a heat pump over natureal gas is if the government successfully raises the price of natural gas through the fantasy policy of “saving the planet”. Then we will have a lot of people who suffer needlessly because of the people for whom they voted.
Stupidity has its own rewards.
“Well, Ivan, that would be quite a trick to convert the stored energy of natural gas to instantaneous electrical power and then to heat through compression and actually save energy relative to directly burning natural gas in 97% efficient furnaces.”
Look, Bruce, do not talk about thermodynamics, it is three levels about your IQ. I will try to keep it simple for you:
A CCNG power plant has an electric efficiency of 50-60%, a modern heat pump extrects from the environment four units of heat with one unit of electricity powering the compressor. Therefore, you can cut the demand for NG by 50%. And to add to your confusion, there are also NG heat pumps which give for one thermal unit around 1.5 units heat.
Of course, a much higher impact is observed if the electricity comes from wind turbines.
“Since a geothermal unit cost anywhere from $15,000 to $35,000 ”
Only an idiot pays 35.000 USD for a heat pump system. If have paid 11 000 USD for a system with ground collector which runs more economically than a NG system.
https://news.mit.edu/2018/carbon-taxes-could-make-significant-dent-climate-change-0406#:~:text=Their%20analysis%20indicates%20that%20starting%20with%20a%20%2450,U.S.%20greenhouse%20gas%20emissions%20by%202050%2C%20Reilly%20says.
Bruce Hall just praised Donald Trump for setting the charge for greenhouse emissions at an incredibly low $10 per ton and has ridiculed Biden for raising it to a more appropriate $50 per ton. Now we all know Bruce Hall has never bothered to think about the economics of anything but I thought I would provide this link discussing the issues. Take a look folks even as we know Kelly Anne Conway has banned Brucie from reading intelligent discussions.
Bruce Hall: “Well, Ivan, that would be quite a trick to convert the stored energy of natural gas to instantaneous electrical power and then to heat through compression and actually save energy relative to directly burning natural gas in 97% efficient furnaces.”
Obviously Bruce knows nothing of the laws of thermodynamics. It turns out that an electric air source heat pump can transfer more than three times as much heat energy as the energy needed to run it. So if the natural gas power plant is 50% efficient and the home electric heat pump is 300% efficient, the output of the combination is 150%, which is better than a 97% efficient gas furnace. No tricks, no magic involved, just elementary science — which is a foreign language to Bruce.
Bruce Hall: “Stupidity is its own reward.”
Indeed! I’m sure you are living a life of bliss.
Thanks a lot James, I missed your opinion.