America is lucky it’s no longer a manufacturing powerhouse—it’s what’s protecting the US economy from the worst of the oil shock, top economist says
https://www.msn.com/en-us/money/markets/america-is-lucky-it-s-no-longer-a-manufacturing-powerhouse-it-s-what-s-protecting-the-us-economy-from-the-worst-of-the-oil-shock-top-economist-says/ar-AA22mZ9d
Posted by paxinfernum
2 Comments
And energy efficiency. And an uptick in domestic production. And an uptick in renewables. Those matter along with a decrease in the energy-intensity of our economy.
We are lucky that this is not analogous to the 1970’s shock. However, the longer this lasts, the worse the impacts inevitably become.
It’s funny because I’ve been saying just the same thing for weeks. The US is highly incentivized to continue the Iran War not just for national security reasons in conjunction with Israel. It also benefits greatly from the short-to-medium-term rise in oil price. The US, not being a net importer, suffers muted impacts to the rising cost of oil compared to Europe and China. This in turn puts pressure on European and Chinese markets and makes those governments view the US’ statements on economic/military threats around the globe more credibly.
Without getting any more political, US companies will be happy to take the oil squeeze if it cuts into their profits… as long as it hits their opponents’ harder. The American manufacturing sector, diminished as it is, is happy to get a relative bump in their competitive edge owing to marginal domestic oil subsidies.
So the US consumer and businesses themselves are pretty content, so far. It remains to be seen whether the US foreign relations strategy will pay off in the forme of preferential future military or economic circumstances, but the US has proven it can engage in activities that will result in disrupted oil markets and bear the cost.
Knowing that, will Europe and China decouple from US-hostile nations that sell them oil? Or will they re-double the strength of those relations to fight back? For my money, I think Europe is ready to pull back from dependence, and China is trying to do so via energy independence as well. This bodes very poorly for oil dictatorships… well, the few that remain, anyway.
This power to control Europe and China’s economies via oil is temporary. In 20 years, I doubt this dependence will still exist. It’s exactly why the GCC have been trying to diversify their economies for years now, and why the UAE left OPEC— they need to sell more oil faster before the price drops to new lows in the coming decades.