{"id":3710,"date":"2014-12-29T15:34:28","date_gmt":"2014-12-29T20:34:28","guid":{"rendered":"http:\/\/olduvai.ca\/?p=3710"},"modified":"2014-12-29T15:34:28","modified_gmt":"2014-12-29T20:34:28","slug":"how-increased-inefficiency-explains-falling-oil-prices-our-finite-world","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=3710","title":{"rendered":"How increased inefficiency explains falling oil prices | Our Finite World"},"content":{"rendered":"

How increased inefficiency explains falling oil prices | Our Finite World<\/a>.<\/p>\n

Since about 2001, several sectors of the economy have become increasingly inefficient, in the sense that it takes more resources to produce a given output, such as 1000 barrels of oil. I believe that this growing inefficiency explains both slowing world economic growth and the sharp recent drop in prices of many commodities, including oil.<\/p>\n

The mechanism at work is what I would call the\u00a0crowding out effect<\/em>. As more resources are required for the increasingly inefficient sectors of the economy, fewer resources are available to the rest of the economy. As a result, wages stagnate or decline. Central banks find it necessary lower interest rates, to keep the economy going.<\/p>\n

Unfortunately, with stagnant or lower wages, consumers find that goods from the increasingly inefficiently sectors are increasingly unaffordable, especially if prices rise to cover the resource requirements of these inefficient sectors.\u00a0For most periods in the past, commodities prices have stayed close to the cost of production (at least for the \u201cmarginal producer\u201d). What we seem to be seeing recently is a drop in price to\u00a0what consumers can afford<\/em>\u00a0for some of these increasingly unaffordable sectors.\u00a0Unless this situation can be turned around quickly, the whole system risks collapse.<\/p>\n

<\/p>\n

<\/a><\/a>…click on the above link to read the rest of the article…<\/span><\/span><\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

How increased inefficiency explains falling oil prices | Our Finite World. Since about 2001, several sectors of the economy have become increasingly inefficient, in the sense that it takes more resources to produce a given output, such as 1000 barrels of oil. I believe that this growing inefficiency explains both slowing world economic growth and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3],"tags":[1752,240,263,2250,1775],"class_list":["post-3710","post","type-post","status-publish","format-standard","hentry","category-energy-2","tag-economic-contraction","tag-economic-growth","tag-energy","tag-energy-inefficiency","tag-oil-price-collapse"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/3710","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3710"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/3710\/revisions"}],"predecessor-version":[{"id":3711,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/3710\/revisions\/3711"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}