more on gasoline price history

[David Farber <dave () farber net>]

Begin forwarded message:

From: Robert Lee <robertslee () verizon net>
Date: August 31, 2005 8:59:31 AM EDT
To: dave () farber net
Subject: RE: [IP] more on gasoline price history
Reply-To: robertslee () verizon net


That was the point of an IP post I did a week ago, in which I had an
egregious typo.

The price of oil is not nearly so much involved in the cost of  
manufactured
goods resulting in broad based COST and PRICING PRESSURES on BUSINESS  
which
CAN result in inflation IF they pass it on.

I think the data shows that the inflationary price of oil manifests  
itself
mostly in the cost of gasoline and heating and that these higher  
costs to
the consumer simply displace discretionary spending at "Walmart" and  
thus
lead to a business reversal and price deflation given that productivity
gains have led to labor representing a smaller part of the component  
costs
of manufacturing and given that the substitution for labor---capital
investment---is almost impossible to trim in the short term,  
resulting in a
very low marginal cost to produce, resulting and allowing a "need to
produce", which leads to lower prices and, to compensate, higher unit  
sales.

Look at Dell.  Look at Cisco.  The prices have never been lower, the  
unit
sales are higher.

In heavier goods like cars, they have never lasted longer, cost less.  
So,
again, like Cisco and Dell, they have a need to produce.

Which winds up, ironically, approximating the Marxian doctrine of "from
those according to their ability to those according to their need" -- 
only in
our case it is "from those according to their need [to produce] to those
according to the incentives we can provide to consume."

Globalism has marginalized the power of any country to control its own
economy.

If you think about the difficulty of Europe and the utterly bizarre  
notion
of the EU and the Euro:  they have a dozen countries each of which has
different economies and none of which can now react to those vagaries  
using
monetary policy.  It is bizarre.  It is like trying to charge Battery A
using a voltage sensor on Battery B.

I see an unending unvirtuous vortex of deflationary pressures, much like
Japan has faced for the last 20 years.

When our government complains that we are all right, that all we have  
to do
is get the Europeans to consume more and save less, you know  
something is
terribly wrong.

Bob Lee



-----Original Message-----
From: David Farber [mailto:dave () farber net]
Sent: Tuesday, August 30, 2005 4:57 PM
To: Ip Ip
Subject: [IP] more on gasoline price history



Begin forwarded message:

From: Jude Shavlik <shavlik () cs wisc edu>
Date: August 30, 2005 1:06:26 PM EDT
To: dave () farber net
Subject: Re: [IP] gasoline price history



> Despite the recent price rises of gasoline in the US, gas is still
> cheap if you consider inflation


Since increases in the price of oil are a big driver of inflation,
isn't it a bit circular and misleading to then adjust gas prices for
inflation?

Does anyone know what fraction of inflation over the last N years
can be attributed to the price of oil?
It would be interesting to see a constant-dollars plot of historical
gas prices
corrected for the impact of oil prices on inflation.

       Jude Shavlik
       Computer Sciences Dept
       Univ of Wisconsin - Madison




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