Filed under: Economics | Tags: Oil, Paul Krugman, Resource Crunch, Speculation
Paul Krugman’s recent editorial in the New York Times asserts that we are slowly loosing the ability to over exploit the planet because, well, their is little to exploit these days. For some reason, during the past few months, I have been thinking about the environmental alot. Perhaps its because I am taking a Political Ecology course, but I am constantly vigilante about not being wasteful.
Nine years ago The Economist ran a big story on oil, which was then selling for $10 a barrel. The magazine warned that this might not last. Instead, it suggested, oil might well fall to $5 a barrel.
In any case, The Economist asserted, the world faced “the prospect of cheap, plentiful oil for the foreseeable future.”
Last week, oil hit $117.
It’s not just oil that has defied the complacency of a few years back. Food prices have also soared, as have the prices of basic metals. And the global surge in commodity prices is reviving a question we haven’t heard much since the 1970s: Will limited supplies of natural resources pose an obstacle to future world economic growth?
How you answer this question depends largely on what you believe is driving the rise in resource prices. Broadly speaking, there are three competing views.
The first is that it’s mainly speculation – that investors, looking for high returns at a time of low interest rates, have piled into commodity futures, driving up prices. On this view, someday soon the bubble will burst and high resource prices will go the way of Pets.com.
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