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February 25, 2011

Comments

guthrie

How about the local issue that the UK is now importing more oil and gas, and an increasing amount at that. Therefore our balance of payments will get worse, which I assume would have some effect on the value of the pound over time.

Strategist

Hear, hear, Guthrie.
It's quite one thing to have a useless shit economy that is spectacularly wasteful of energy when you have enough oil and gas for all your own needs plus a little bit to sell to help pay for imports.
Quite another when you have to generate a dollar in export earnings for every dollar of oil you burn, before you've even started generating earnings to pay for imports of everything else.
It seems to me plausible that the British economy we have become used to is spectacularly fucked. Conventional market economists have been remarkably blind to this; anyone know why?

Agog

"Therefore our balance of payments will get worse..."

Ceteris paribus.

As if we're powerless to respond, as if we have no other wealth, no skills to offer...

Matthew

The amount of oil we produce is clearly an important factor - as a net exporter the country gets richer from higher oil prices, now we don't. It doesn't really show up in the data though (although perhaps explains a little why low oil prices in late 1980s didn't reduce unemployment?)

guthrie

Agog - I'm pretty sure we do have other things to offer, I just don't quite know what they are, not being an economist or whatever. But given our balance of payments on goods has been highly negative for the last 15 years, not even balanced by services, you've got to wonder exactly how things are supposed to get better. Perhaps you have an idea?

Metatone

Worth noting that the marginal cost of oil production appears to be circling the $80 mark...

http://www.eurotrib.com/story/2011/2/25/65550/4909

There is volatility, but the baseline does appear to have moved.

Strategist

"As if we're powerless to respond, as if we have no other wealth, no skills to offer..."

Of course Britain has precious little other natural wealth. Oats? Herring? Sorry mate, we've fished all those out.

And as Guthrie points out, the revealed preference of the market is that we make relatively few things beyond weapons that foreigners want to buy.

Those free market economists who think adjusting from an oil-bankrolled economy to an non-oil bankrolled is a simple process that the invisible hand will do for us by magic have simply no idea how hard it will be to catch up with the world-beating companies and products of the Germans or the Japanese.

We've got the wind and the tides and need to get on the case of harnessing those. We're making a pretty half arsed job of it so far.

guthrie

If i'm understanding the data correctly, there are other financial things going on which help balance up the balance of trade, the problem being that such things hardly benefit the rest of the populace since it goes to the finance industry who then spend it on German engineering and French champaigne. Taxing the finance people helps fund some social relief etc, but the new government doesn't seem quite so interested in keeping these things going.

Tari Ledsome

Yes, it is becoming a global phenomenon! Hybrid cars can lessen our dependence on foreign oil and help develop locally-sourced resources such as biofuel.

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