Saturday, April 23, 2011

Seen Elsewhere

Via Carpe Diem there are indications that the economy is getting better. Freight transportation is generally a leading indicator so an increase in truck orders is a good sign. Also, (men's) underwear sales are up. Alan Greenspan liked the underwear indicator.

Since Friday was Earth Day, we've heard a lot about sustainability. Via Econlog, some interesting comments on sustainability. Also, what's the present value of a new taxpayer?

From the monopoly regulation area, we have APS looking for a rate hike to pay for capital infrastructure.

Finally, a paper from the New York Fed on why banks are holding so many excess reserves.

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Thursday, April 21, 2011

Rolling on Down the Concourse

As technology changes, so do business opportunities. In this case, it is the wheel that has eliminated a profitable business.

The city will pay up to $360,000 for a company to manage and lease out luggage carts to passengers arriving to and leaving from Phoenix Sky Harbor International Airport.

Fewer passengers rent the carts because they use wheeled luggage. Carts no longer are a money-making business.

Not unlike payphones.


Sunday, April 17, 2011

Perception is Reality in Oil Prices

My previous post on the reasons for the increasing price of oil may be unsatisfying to some. You will note that a number of the reasons are because of what could happen, not because of what has actually happened.

The reason what could happen affects the price is because markets are always forward looking. If something will happen in the future, it will be reflected in the price today. Similarly, if something could happen, it will also be reflected in today's price, but perhaps at a discount.

In non-renewable natural resources the future is reflected in what is called the Marginal User Cost. This is the opportunity cost we pay today for using a unit of a resource today rather than having it available to consume in the future. If supplies in the future will be lower, MUC increases. Similarly, if supplies in the future might be lower, MUC increases.

On the flip side, if future supplies are thought to be plentiful, MUC may go to zero leaving the price equal to the marginal extraction cost.

For further explanation, see my earlier post on MUC when oil prices were falling.

In short, the market's perception of the future changes the price today.

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Something Must Be Making the Price of Oil Go Up

Coyote Blog has a long post on speculation and the rising oil price. It's worth a read since it covers a lot of basic economics. In the comments, someone notes that "Well, something has caused gas prices to go up precipitously in the last two months."

My response is to look at the price of oil.

The world price of oil has gone up for several reasons. Libya produced 2% (about 1.6 million bpd) until the revolution. Last I saw it was below 700K. The Saudi's said they would make up the difference but I don't know if that has really happened.

Egypt is a very minor producer but a lot of Europe's oil goes through the Suez canal. The potential for supply disruption has sent prices up in Europe.

BP's blowout in the gulf added to the uncertainty of supply. The administration's moratorium and continuing delays in permitting new drilling off shore exacerbates this.

Further unrest in oil producing countries doesn't help either.

On the demand side, China and India are growing again and increasing their demand for all commodities including oil.
Given all that is going on, it would be very strange indeed if we didn't see an increase in the price of oil.

It's not one thing, it's lots of things.

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Saturday, April 02, 2011

Brains! The Economics of a Zombie Attack

The video of my brownbag talk is up.

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Various Goings On

Via Carpe Diem: Employment gains last month were entirely female. Men didn't participate.

Also via Carpe Diem, 48% of Phoenix home buyers paid cash in February.46.1% of all buyers were absentee buyers, probably investors.

First Solar will get $2 million from the Maricopa County Supervisors Taxpayers.

The Governator.

And somehow the East Valley Tribune misses the irony of Intel only investing in Arizona if they get tax breaks (including substantial property tax breaks) while they complain about education and school funding (paid for primarily by property taxes they aren't paying.)

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