Economists' approach lacks energy

Bill Barnhart April 27, 2001 What's wrong with this picture?

The following two sentences appeared in succession in the results of a recent membership survey by the National Association of Business Economics:

"While a concern for goods producers and the transportation/utility/communications sector, high energy prices remain a relatively minor cyclical issue for most NABE firms.

"Falling demand is the top worry at NABE firms, as 40 percent reported conditions in their industry matched conditions in past recessions."

The connection between higher energy prices and falling demand apparently has yet to register with business economists. But it's becoming clear to everyone else.

First-time claims for unemployment compensation jumped unexpectedly to a more than five-year high.

Meanwhile, gasoline futures soared to an all-time high in late futures trading, exceeding the previous record reached when Iraq invaded Kuwait in August 1990.

Crude oil for June delivery jumped $1.15 a barrel, to $28.44.

In other words, those driving around in search of a job are going to be paying a lot more for the privilege.

Oil company executives told members of Congress on Thursday that the United States is in danger of a significant shortage in gasoline supplies this summer.

"Any type of major disruption can cause local supply shortages and resulting price spikes," said Gary Heminger of Marathon Ashland Petroleum.

Separately, experts told The Wall Street Journal that California's electricity price shock could spread throughout the country because of onerous consequences of electric utility deregulation and the obsolescence of electricity transmission lines.

Before technology dominated the stock market, the last sector to hold such sway was energy. This could be deja vu all over again, as investors chase energy plays amid shortages.

http://www.chicagotribune.com/business/printedition/article/0,2669,SAV-0104270403,FF.html

-- Martin Thompson (mthom1927@aol.com), April 27, 2001