A reader writes:
I estimate (don’t kinda think) that a large portion of today’s inflation is due to environmental policies, in particular the war on fossil fuels.
Aside from provision of absolutely no documentation of the allegation, I note that oil prices started rising before Biden’s election. They did rise upon Biden’s election, although one should note that the 10yr-3mo Treasury spread also started rising, presumably not because of the war on fossil fuels, but rather because expectations of economic growth had risen. We can see the co-evolution of oil prices (which are determined in global markets) and the 10yr-3mo term spread in Figure 1.
Figure 1: Price of oil, WTI, $/bbl (blue, left scale), and 10yr-3mo Treasury spread, % (tan, right scale). NBER defined recession dates shaded gray. Sky blue dashed line at election, blue line at Georgia special election, and red dashed line at expanded Russian invasion of Ukraine. Oil price is FRED series DCOILWTICO, spread calculated using FRED series DGS10 and DGS3MO. Source: EIA, Treasury via FRED, NBER, and author’s calculations.
Oil prices actually started rising with the end of the recession, with the trough dated at April 2020.
The reader might also argue that the gyrations in oil prices since November 2020 have been due to an ongoing war on fossil fuels; I would tend to land on the side that macroeconomic fluctuations, supply decisions by the low-marginal cost producers (e.g., Saudi Arabia), and expectations drive the time variation in oil prices.
The argument that the war on fossil fuels drove inflation must mean that headline inflation across many countries has risen due to the US war on fossil fuels. Conceivable (kind of), but I must confess I don’t see the transmission mechanism.
Figure 2: Year-on-year CPI inflation for US (black), Euro area (HICP) (tan), UK (green), Canada (red), Australia (pink), in %. NBER defined peak-to-trough recession dates for US shaded gray. Source: BLS via FRED, European Commission via FRED, Canada via Statistics Canada, Australia via FRED/OECD MEI, NBER and author’s calculations.
More analysis from this particular reader, here. Since this reader does not believe in the usefulness of futures data, I have not included future data; the oil price data are spot. This reader has also accused me of hiding the raw data and mislabeling data; hence I have provided the FRED mnemonics for Figure 1. Links for the CPI data are available upon request.
“Aside from provision of absolutely no documentation of the allegation”
But CoRev said this was his estimate which was based on his secret model that he cannot be bothered to explain. Standard faire for CoRev – make a claim with no theoretical or empirical support.
Off topic, but not really –
Some of our partisan hacks want very much to have a recession before the fall elections, or failing that, to convince undecided voters that we are in recession when we are not. Anything to win power. Turns out, Democrats picked up 10 points in generic voter preference polling since the Theocratic Court overturned Roe:
Democrats lead in generic polling 48% to 41% for Republicans. That 7 ppt lead, if maintained, would be about what it takes for a Democratic House majority, based on the prior gerrymander. Don’t have data yet for the new gerrymander.
Back on topic, that “I estimate” is pure comedy. The author of “I estimate” hasn’t a clue how to estimate. The claim means nothing. Thanks for the chuckle, though.
Oh, and before the usual suspect attempt their usual “fake science” nonsense and suggest that Marist polls are unreliable, 538 gives the Marist polling organization an “A”:
538 on House outlook
538 on Senate outlook
538 Biden net approval: -17,7 v -10.8 for Trump, the previous negative net approval record holder post-Truman. But, hey, Biden is ahead of Truman at this point in his term: Biden: -17.7, Truman, -19.0
Biden’s popularity continues on a notable negative trend.
House will be hard for Dems, but despite Biden’s low numbers, latest polls on Senate have Dems winning in PA, OH, and WI. flipping seats, while holding NV, AZ, and even GA narrowly. That has them gaining and not needing Manchin, although nothing will be coming out of House if GOP takes other than lots of hearings about Hunter’s laptop and sex life. But Biden can still get judicial and other appointments through, which is important.
CoRev is indeed a funny little dude!
“They did rise upon Biden’s election, although one should note that the 10yr-3mo Treasury spread also started rising, presumably not because of the war on fossil fuels, but rather because expectations of economic growth had risen.”
CoRev is imitating the chirping little bird known as Bruce Hall. What policies has Biden enacted they chirp? Well the correct answer is not some alleged war on fossils but policies that have led to a full employment economy. Which most people would see as a good thing. But not these two chirpy little birds – oh no. The only thing that matters is the price of gasoline.
Alas the FED has gotten wrapped into this nonsense which is why they may be overreacting by raising interest rates too much. Of course MAGA hat wearing little birdies are hoping for a recession before the next election, which explains all that BS from fellow chirping little birdie Princeton Steve.
Kevin Drum keeps telling us that inflation may be abating. Of course Kevin is not happy that the FED is engaged in tight monetary policy. Maybe we should be highlighting his posts on the hope that the FED notices!
Barking Bierka – the NYC Jerk says: “Kevin Drum keeps telling us that inflation may be abating. Of course Kevin is not happy that the FED is engaged in tight monetary policy. Maybe we should be highlighting his posts on the hope that the FED notices!”
And just prior to this comment Bierka said:
“Alas the FED has gotten wrapped into this nonsense which is why they may be overreacting by raising interest rates too much. Of course MAGA hat wearing little birdies are hoping for a recession before the next election, which explains all that BS from fellow chirping little birdie Princeton Steve.”
Perhaps talking directly to the Fed would help since they just signaled a another possible 0.75% increase.
Oops Who was that talking about the Feds secretive estimating tool?
Hey big brave little boy. Why not comment over at Kevin’s place? You do not ever seem to do so. Why? Are you scared that his smart readers will slap you down for the dumb little troll that you are?
It isn’t tight, but normal.
Menzie, chose not to comment in the referenced comment string, but does now with these graphs? The entire comment was:
July 4, 2022 at 4:01 am
Unless we forget, on another comment thread: ”
MD finally make a meaningful statement: “For some of us, economics is more than just a dry exercise. Economics informs policy and policy is made through politics.”
The result of those policies are evident in today’s economy. Do you agree or not?”
MD kinda thinks environmental issues are more important than economic issues. I estimate (don’t kinda think) that a large portion of today’s inflation is due to environmental policies, in particular the war on fossil fuels. In 2021 the world’s GDP is estimated to be~ $94T. What is the cost of the inflation due to the unthinking, virtue signalling obeisance to these environmental policies?
The costs are immediate. What are the benefits?
I dunno what Menzie thinks Figure 1 shows, but this is some of the contemporary writing soon after the inauguration: https://www.cnn.com/2021/02/26/investing/oil-prices-gas-biden-election/index.html
“….US oil prices have skyrocketed 69% since November’s election based on Thursday’s close at $63.50 a barrel.
That’s easily the biggest post-election gain through this point in the presidential cycle since NYMEX oil futures began trading in 1983, according to a CNN Business analysis. The next closest post-election rally occurred when crude jumped 31% after President George H.W. Bush’s victory in 1988….”
Plus this argument is just misinformation at its worst: “The argument that the war on fossil fuels drove inflation must mean that headline inflation across many countries has risen due to the US war on fossil fuels. Conceivable (kind of), but I must confess I don’t see the transmission mechanism.” I have never limited the war on fossil fuels to the US. It has been ongoing world-wide, as I have pointed out several times, and is evident in the growing current European gas/oil crises.
Perhaps Menzie should use this example for his students of how bad policy impacts prices. To clarify the policy is: Environmental issues (as implemented in the war on fossil fuels) are more important than economic issues.
A longer perspective shows that, with the exception of the forced shutdown of economies in 2020, oil traded in a fairly narrow band and it wasn’t until 2021 that a combination of factors caused oil prices to rise … before the Russians invaded Ukraine.
• Oil price collapse due to economic shutdowns in 2020 cause production to plummet and workers to be fired creating a future worker shortage.
• Gasoline production plummeted and some refineries were shut down or converted to producing other chemicals
• Biden’s first day in office executive order sent a clear message to the oil industry that they were going to be opposed by this administration.
• Investors and oil companies, faced with a clear anti-industry government, decided that further investment was risky and it was better to take profits for distribution back to shareholders.
So, while the current oil price debacle is not all of Joe Biden’s doing, his policies have exacerbated the situation. Begging Saudi Arabia, Venezuela, and Iran to increase production to lower world’s oil prices is a fool’s errand… and clear hypocrisy.
Oil price collapse due to economic shutdowns in 2020 cause production to plummet and workers to be fired creating a future worker shortage.
Gasoline production plummeted and some refineries were shut down or converted to producing other chemicals
Well your first two bullet points were correct. And who’s fault was this? Oh yea – Hillary’s fault as she let that incompetent boob become President.
Now you next two bullet points have been rebutted by our host many times. But keep repeating you lies over and over as they magically turn into Alternative Facts. Works for your boss Kelly Anne Conway!
Well your first two bullet points were correct. Obviously. As to who shut down the economy… try state governors following the mandates of Dr. Faucistein.
Now you next two bullet points have been rebutted by our host many times.
Yeah, the rest of the world is wrong, too. I believe you are putting words in Menzie’s keyboard. The BBC seems to agree with me and they aren’t known for being particularly conservative.
As it is, while I see all these GOPs going on about how terrible everything is and we have never seen US society doing so badly, all those mask mandates and lockdowns that crazy right wingers were driving around Washington to protest are gone, although there is a new nasty omicron variant spreading. But, do we see any of these people noticing this or giving credit to the Biden admin? No, we get dummess remarks like “Faucistein.”
And, yes, I am going to be waiting for all those ranting about high gasoline prices to start noticing that they are coming down, although that does not fit with this narrative of everything is more awful than it has ever been.
Barkley, let me correct your claim: “… high gasoline prices to start noticing that they are coming down, although that does not fit with this narrative of everything is more awful than it (was in the last administration).” Yup! Everything is worse.
“Everything is worse” even though gasoline prices are coming down and the mask mandates and so on are gone? Really?
This is moving goal posts into an insane asylum, worse than your usual nonsense by quite a bit.
In the usa, lockdowns were implemented by the people regardless of whether a governor locked down. Even in texas the state remained locked down even after abbott tried to reopen and push the virus on the population. The people chose the safety of a lockdown. Bruce hall seems to think the appropriate step was to let the virus spread unabated in may 2020, perhaps trying to kill millions for political points. You bore me with hour political positions bruce.
It seems economists are confused over the impacts of oil prices on inflation. They make a good point that oils impact has lessened on inflation/CPI. This is only one article making that point: https://www.economicshelp.org/blog/167245/economics/the-relationship-between-oil-prices-and-inflation/
“Oil prices are an important factor in determining inflation. A very significant rise in oil prices will feed through into higher inflation. However, there are many other factors affecting inflation, apart from oil – notably, wage growth, confidence, spare capacity in the economy, rate of growth. Therefore, even if oil prices rise, it might be outweighed by other factors.”
Other articles, I won’t reference them, also make that point that the impact of increased oil prices is lessened, but when coupled with higher wage increases, they may extend and increase inflation’s effects. Oil prices may be volatile, but wage increases are less so.
So the issue is not whether oil price increases impact inflation/CPI but how much. I doubt if there is an issue that policy impacts oil prices. Menzie has so admitted in earlier threads.
My dad used to dabble with paint by number kits. No – he was not an artist in the least.
It looks like you approach economics in a similar way. Which explains why your usual comments are so incredibly stupid.
I estimate (don’t kinda think) that a large portion of today’s inflation is due to environmental policies, in particular the war on fossil fuels.
[ This is incorrect as easily understood in considering that the administration of Donald Trump spent 4 years in undermining environmental policies, with no subsequent lessening of energy price increases. Also, China spent those 4 years and beyond in continually toughening environmental policies with the result now being no significant energy price increases. Toughening environmental policies in China meant an emphasis on a range of energy sources and the ability to transmit energy nationally from regional sources. Along with energy prices, food price increases are limited in China as a result of forward-planning. ]
July 7, 2022
China’s BYD overtakes Tesla as world’s biggest EV producer by sales
China’s BYD, which means Build Your Dreams, dethroned Elon Musk’s Tesla as the world’s biggest electric vehicle (EV) producer by sales in the first half of 2022.
Based in Shenzhen City of south China’s Guangdong Province, BYD sold about 641,000 vehicles in the first six months of 2022 with a year-on-year increase of over 300 percent, while around 564,000 vehicles were sold by Tesla during the same time period, according to company filings….
I would say good point but telling the truth runs the danger of setting CoRev off. Better to let that dog alone as he chases his own tail.
June 25, 2022
China unveils EV battery with unprecedented 1,000km on single charge
By Liu Xun
A record-breaking electric vehicle (EV) battery, with an unprecedented volume utilization efficiency of 72 percent, an energy density of up to 255 watt hour/kilogram (Wh/kg), the world’s highest integration level, and capable of delivering a range of over 1,000 kilometers on a single charge, was revealed by a Chinese company on Thursday.
The battery, named Qilin after a legendary creature in Chinese mythology, is expected to go into mass production in 2023, said Contemporary Amperex Technology Co., Ltd. (CATL), China’s leading automotive lithium-ion battery maker.
In 2019, CATL launched the world’s first module-less battery pack cell-to-pack (CTP), taking the lead in achieving a volume utilization efficiency of over 50 percent.
The Qilin battery, or CTP 3.0 battery, with the third generation CTP technology, has a volume utilization efficiency of 72 percent and an energy density of up to 255 Wh/kg for ternary battery systems, giving it the highest integration level in the world, according to CATL.
The battery delivers 13 percent more power than the 4680 battery produced by global EV giant Tesla, with CATL saying it offers improvements in range, fast-charging, safety, service life, efficiency and low-temperature performance.
World’s most integrated e-car battery
The CTP technology, which directly integrates cells into packs without modules to improve system energy density, simplify manufacturing and help reduce costs, features the CTP 3.0 battery with improvements in service life, safety, charging speeds and low-temperature performance.
The integrated energy unit, composed of the cell and the multifunctional elastic interlayer, builds a more stable load-bearing structure perpendicular to the driving direction to enhance the shock and vibration resistance of the battery pack….
July 7, 2022
China unveils plans to promote NEV sales, second-hand car tradings
China on Thursday unveils a series of measures to promote new energy vehicle (NEV) sales and second-hand car tradings.
According to a joint statement made by the Ministry of Commerce (MOFCOM) and 16 other departments, the country will guide enterprises to increase incentives to encourage the use of new energy vehicles in rural areas.
The world’s largest car market will also support the construction of charging facilities, said the statement….
Oil prices over the past decade traded in a fairly narrow range (except when the state economies were shut down in 2020). Early in 2021 oil prices started a dramatic rise (before the Russian invasion of Ukraine which exacerbated the problem)
• Biden’s first day in office he declared the oil industry was the antithesis of his administration and that set the stage for oil industry to change it’s strategy from one of expanding production (which it was doing prior to the pandemic) to one of distributing profits to shareholders and declining new investment.
• When the Russian invasion precipitated a global panic about energy on top of already short supplies, Biden quickly sought out Saudi Arabia, Venezuela, and Iran to increase their oil production to bail out the world’s shortfall despite the obvious hypocrisy.
• Europe has quickly followed suit with the declaration that nuclear power and natural gas are now “green” (nuclear always was, but Europe was hypocritically shutting down those power generators).
https://www.bloomberg.com/news/features/2022-01-31/europe-s-nuclear-power-plants-are-disappearing-just-as-energy-crisis-hits-hard (two months prior to Russian invasion of Ukraine)
Reality is a b****.
I dunno Menzie, when I look at inflation and not oil prices I see a pretty steady rise from 1.4 in Biden’s 18 months. You even quoted what I said: “I estimate (don’t kinda think) that a large portion of today’s inflation is due to environmental policies, in particular the war on fossil fuels.”
BTW, the “war on fossil fuels” is more inclusive than just oil.
CoRev: The point is not the rise in prices; the point is whether you can attribute the rise to specific policies of the Biden Administration.
Menzie: “CoRev: The point is not the rise in prices; the point is whether you can attribute the rise to specific policies of the Biden Administration.” I have made the attribution for weeks now, and the best you have done is: “Oil prices actually started rising with the end of the recession, with the trough dated at April 2020.” WOW! Product prices went up, recovering, after a recession? What a shocker to see on an economics and politics blog from an economics professor.
The real issue is why did you not show inflation (rate), the subject of the claim? I know and you know why it is not shown. When inaugurated it was 1.4% and now is 8.6%.
Is Jerry Bowyer your teacher? He was the master of the Fuzz Chart. The National Review actually pays people for your kind of disinformation so go for it!
CoRev Which policies of Biden’s do you have in mind? And please be specific. And please be relevant. Pointing to a speech won’t do. Talking about goals for 2050 won’t do. You need to cite specific policies that have had an immediate impact on fossil fuel output. As far as I know, the only Biden policy that has driven up the price of fossil fuels is Biden’s decision to support Ukraine. Of course, you’re a well-known Putin sympathizer so I’m not surprised that you want to blame Biden for that.
Even Bruce Hall is trying to talk about Biden’s alleged policies. Of course his attempts are so feeble that they almost make CoRev’s babble look smart.
Then again there is the repeated assertion. Tell the same lie over and over and its becomes their reality. Works for Trump and we know these two wear their MAGA hats so tightly that it has cut off blood flow to the brain.
Look back to the links I provided. Not “feeble”. Your attempts to refute through ad hominem retorts are what is “feeble”. CV?
2slugs asks for specific Biden policies that have caused inflation. I’ve given a class of polices and specifics examples have been discussed for weeks.
The more important question is which of Biden’s policies have been successful? If he wants to describe policy classes they could be:
Gee – some one taught you to spell. Congrats on graduating preK. Now maybe in the next 10 years, little CoRev will finally learn how to write.
You lose again. Try an actual response based on facts rather than feeble attempts at being snide.
Oh eff you. I provided lots of polices to your stupid list, which failed to include the pandemic, where Biden’s polices have been far superior to Ttump’s, although I give him credit for aiding getting vaxxing going and encouraging. He did a few good things.
As it is, boy, sorry, but you have completely lost your marbles. “War on fossil fuels” is not a policy. Releasing oil from the Strategic Petroluem Reserve is, something Biden has been doing that tends to pull those darned gasoline prices down. You made a fuss about the keystone pipeline, but that was and is a big zero in all this.
Sorry, you worthless liar, you lose.
Oh, and which medal you claim you got for the Apollo program do you wear when you go the bathroom, please? Vomitorium City for you, boy.
Barkley, tsk, tsk. Control!
Energy is complicated, with me supporting renewing the JCPOA nuclear deal with Iran, which is good in itself and also would increase oil supplies.
Immigration? No more children being put in cages and ending some discriminatory policies Trump put in place. It is hard to get sensible general reform with Congress deadlocking on it, but the hysteria by Fox News people on immigration is ridiculous. Generally more of it is good for the economy and society, even the illegal type, despite the insane ranting by people on Fox News that appeals mostly to stoopid raycists.
Economic, well inflation is clearly a problem, but unemployment is down and employment is up. This is s mixed bag, and the main financial markets are higher than they were when Biden took office, which one would not believe if one spent one’s time watching Fox News.
Foreign? The Afghanistan exist looked awful, but US troops outtathere and it was Trump who negotiated a surrender to the Taliban. Otherwise, Biden has enormously improved US relations with most of the world and has organized solid support for Ukraine in the fame of Putin’s invasion, although we get it you do not approve of that, CoReve.
Crime is certainly a problem, with homicides up. But in fact it is not as bad as again Fox News makes it look by focusing on a handful of especially troubled cities. Overall violent crime is not actually up much, with some categories, such as assaults, actually down nationally, helping to offset the highly concentrated increases in homicides, which are certainly a problem.
Educatioi? Are you kidding? You support these sickos whining about “grooming” and wanting to ban books while threatening the lives of school board members? I have mixed feelings about Biden’s move to reduce student debt, but he said he would and he has made some moves in that direction.
So, frankly, CoRev, not nearly as bad as you think it is, although watching Fox News all the time you would never know any of this.
Barkley Rosser The Afghanistan exist looked awful,
Speaking as a retired ORSA guy with the US Army, the Afghanistan withdrawal may have looked ugly to the layman, but as a military withdrawal it was almost flawlessly executed. If you had asked anyone to predict the number of casualties, I doubt that anyone would have hazarded a guess as low as thirteen non-US personnel and zero American troops. And we lost very little in the way of valuable materiel; mostly just some old obsolete HMMWVs and FMTVs that weren’t worth the cost to bring back. Compared to the Gulf War and Iraq War reverse logistics operations the Afghanistan withdrawal looked downright textbook. Then again, the general public never really saw or understood what was going on during the Gulf War and Iraq War withdrawals, just as they don’t know how sausage is made.
CoRev, not nearly as bad as you think it is, although watching Fox News all the time
My hunch is that CoRev no longer thinks Fox Noise is crazy enough. His current news source is RT, which would explain his endless fawning over Putin.
There remains an unexplained mystery that made that one day look really awful and tanked Biden’s poll ratings. It had to do with Afghan President Ghani. On that crucial day one of his guards erroneously told him Taliban were already in the palace. This led him to leave immediately, setting off a complete collapse of the Afghan government. To this day I have not seen an explanation of what led that guard to make that false claim that so upended things and led to those people hanging off airplanes. Ugh.
Barkley, you failed to cite even 1 policy. I even gave you the categories/classes. I asked for a list of successful Biden policies. My policy example was his “War on Fossil Fuels”.
Ah yes…once again another case of “pulling a CoRev.” Don’t answer the question and then pretend that you did. Why don’t you grow a pair and man up? When cornered you resort to the same old attempts at misdirection. Try some intellectual honesty and answer a very simple question instead of running away and trying to change the subject. You’re the one who made the claim about Biden’s supposed “war on fossil fuels”, so back it up with some specific examples instead of more word salad.
This is his notorious propensity to move goal posts at the drop of a hat when he is losing an argument, which is most of the time.
2slugs, the number who claim the Afghanistan withdrawal was ” it was almost flawlessly executed. ” is really tiny.
It’s also almost impossible to answer a question when it is fundamentally flawed. So pulling a 2slugs, in asking a fundamentally flawed question, then like many “low information” questioners can not understand when it is answered.
Even Barkley thinks he was talking about policy and not their mixed results.
You and he have been very wrong lately with some real boners of mistakes.
We could add the return to full employment. Oh wait – CoRev and Bruce Hall were ordered by Kelly Anne Conway never to mention how well labor markets are doing.
Barking Bierka – the NYC Jerk answers a question re: Biden’s successful policies with: “We could add the return to full employment. ” I’ve already noted that ?full? employment is a result of a policy. What was Biden’s policy? Incidentally if 3.6%, Biden’s number, then 3.5% Trump’s number must mean really full employment.
I guess Biden’s policy was to just followed Trump’s policy. Good result though.
BLS unemployment numbers;
Jan. 2017 4.7% Obama
Jan. 2021 6.4%. Trump
June 2020. 11.0% Trump
June 2021. 5.9%. Biden
June 2022. 3.6%. Biden
In Trump’s first year, (1/17-1/18) unemployment decreased 0.7%
In Biden’s first year year , (1/21-1/22) unemployment decreased 2.4%
Based on your “reasoning,’” Biden’s policy was a definite improvement
You were already given an answer on this, although you pretend to ignore it. The ARP of Biden, his fiscal stimulus that many now criticize for being too much and contributing to inflation, which it may well have done a bit. But it sure as heck stimulated employment; nobody is disputing that, with people like you preferring to simply ignore this aspect of it, as you have already done.
Again, CoRev, answer was given to you. Stop lying that it was not, even if pgl did not provide it. We have your lying number.
Forget that nonentity Biden. Speak instead of the Paris Agreement and the struggle against CO2. It seems like that intellectual trend has had some effect on the investment community, ramifying through oil prices.