BIKE: US economic perplex simply described

[Roger Baker]

[OK so maybe this is a little off topic, but we are about to see the US 
transportation system transformed. The current $48 dollar oil will look 
mighty cheap in a year or two. -- Roger]


<http://www.washingtonpost.com/wp-dyn/articles/A57886-2005Jan7.html>

Rising Oil Costs Ahead

Saturday, January 8, 2005; Page A18

  In his Dec. 29 op-ed column, Robert J. Samuelson said that strong 
consumer spending can no longer be relied upon as the engine of this 
country's economic growth because of rising consumer debt, increasing 
interest rates, a costlier welfare state and the effects of 
globalization.

He left out another factor: Oil prices averaged $26 a barrel in 2002, 
$31 in 2003 and $41 in 2004. Prices are projected to be higher this 
year because oil supplies may be diminishing at the same time demand is 
increasing worldwide. This likely will drive the cost of energy higher 
for everyone.

As Mr. Samuelson pointed out, the dollar has depreciated 15 percent 
since early 2002 and will probably depreciate more as federal and 
consumer debt make dollars and Treasury notes less attractive to 
foreign investors and foreign central bankers. This could increase the 
cost of oil for Americans more rapidly than for others.

  Mr. Samuelson further noted that the U.S. economy is resilient and 
innovative; however, this is at odds with our dependence on cheap 
energy. We are half as efficient in our energy consumption as Europe 
and Japan and therefore arguably twice as vulnerable to rising oil 
prices.

One also can reasonably question Mr. Samuelson's logic that a 
depreciated dollar can increase U.S. exports. During George W. Bush's 
first administration, the dollar declined in value relative to the euro 
more than 30 percent, while the current accounts deficit has nearly 
doubled. With rising energy costs, we have no guarantee that a 
depreciating dollar will result in increasing exports.

TONY NOERPEL

Lovettsville


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