Oil is Found in the Minds of Men

And ‘peak oil’ is founded on ignorance, argues Peter Foster:

Peak Oil theory represents a combination of economic ignorance and moral rejection of markets as greed-driven and short-sighted. These all-too common attitudes usually go with a profound faith in effective government policy, despite the monumental weight of evidence to the contrary.

posted on 19 September 2009 by skirchner in Commodity Prices, Economics, Financial Markets, Oil

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Commodity Prices and the Australian Economy: Trends versus Cycles

I have an article in the latest issue of Policy examining trends and cycles in commodity prices.  In the article, I highlight the difficulty of isolating longer-run trends from the pronounced multi-year cycles in commodity prices.  I also argue that commodities are not nearly as important to the Australian economy as commonly assumed.

posted on 07 January 2009 by skirchner in Commodity Prices, Economics

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Why Falling Commodity Prices May be Good for Growth

The Australian economy expanded 0.1% in the September quarter, which is dismal enough, but non-farm GDP contracted 0.3% over the quarter.  Farm output rose 14.9% over the quarter.  In current prices, the increase was only 7.5%, but the price deflator for farm GDP fell 6.5% over the quarter.

This points to a little appreciated aspect of the relationship between commodity prices and the Australian economy.  High commodity prices are often the flip side of weak commodity production, which depresses real GDP growth.  To the extent that lower commodity prices reflect increased output, this is actually a positive for real GDP growth. 

As I argue in a forthcoming article in Policy, commodity prices are far less important to economic growth in Australia than conventionally assumed.

posted on 03 December 2008 by skirchner in Commodity Prices, Economics

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