Access [to The Economist] is free
Andy Brett, Gristmill
The Economist has on its cover this week a not-so-flattering caricature of Uncle Sam and a [Chinese] dragon, both sipping down oil like there's no tomorrow. The article is "The Oiloholics."

Why do I mention this now? Usually you have to subscribe to the magazine to read this article. But today you can watch an ad and get access for free.
(26 August 2005)

The oiloholics
Oil prices could yet go higher-unless the world's biggest gas guzzlers curb their thirst
The Economist
THE price of oil affects the cost of almost everything. It helps determine not just the cost of driving to work or flying off on holiday, but also the cost of furniture, food and anything else which has to be transported from factory to shop floor. The past three global recessions were all triggered by a jump in oil prices. Thus, it should be alarming that oil prices have more than tripled since late 2001. So far, though, the world economy has held up remarkably well: global GDP growth is strong and inflation remains modest. How long can this continue?

...The main reason why high oil prices have so far not kiboshed the world economy is that cheap money has supported spending sprees and housing bubbles in many countries, notably America, which have offset the impact of dearer oil. The two main engines for the world, the United States and China (also the two biggest oil consumers), have both had their growth boosted by lax monetary conditions in the past couple of years. Indeed high oil prices can partly be seen as a consequence of low interest rates. The two most important prices in the world economy are the price of oil and the price of money, and they are linked.

..America and China, in their different ways, are drunk on oil consumption. The longer they put off taking the steps needed to curb their habit, the worse the headache will be. George Bush once learned that lesson about alcohol. It is time for him to wean America off oiloholism too.
(25 August 2005)

Counting the cost
The Economist
HAD you been told in late 2001—not long after that September's terrorist attacks, and when stockmarkets had been tumbling for 18 months or so—that the price of crude oil would more than triple within four years, you might well have predicted global economic meltdown. The price of a barrel of West Texas Intermediate has risen from $18 in November 2001 to record levels: it hit yet another new high, above $67, this week. This is similar in scale to the price jumps of 1973-74, 1978-80 and 1989-90, all of which were followed by worldwide recession and rising inflation. Today, though, global GDP growth is well above trend, while inflation remains low. Why has the world economy fared so comfortably this time?

...As a result of low interest rates, America and some other economies have enjoyed a boom in house prices, accompanied by a surge in household borrowing and a falling saving rate. Higher oil prices have acted like a tax on consumers, leaving them less money to spend on other goods. But in America this has been fully offset by borrowing against soaring home prices. This explains why higher oil prices appear to have depressed domestic demand by more in Europe than in America: in most euro-area economies there has been little or no cushion from increased borrowing against property.

The fact that America's economy has been able to shrug off higher oil prices mainly as a result of a housing and mortgage bubble is hardly a comforting thought. What happens when house prices flatten, or even fall? Consumers will then feel the full force of dearer oil. Come to think of it, a further spike in oil prices could even be what pops the housing bubble, if it unsettles consumers enough. So far, the rising oil price has done little harm; but worse may well be on the way.
(25 August 2005)

Hot oil
Heavy trading volume boosts the outlook for exchanges
The Economist
PRODUCERS are not the only ones grinning about the price of oil. For the exchanges trading in oil futures, and those that list the shares of oil companies, the current obsession with “black gold”—where will the price go next?—is proving good for business.
(25 August 2005)
Short article.

Ecuador: Free-for-oil
The president gets a taste of his own medicine
The Economist
...Oil provides about a third of the government's revenue. The protests will make it harder still for Dr Palacio to achieve his social goals. Venezuela's president, Hugo Chávez, ever eager for political clients, in July offered to buy up to $500m in Ecuadorean bonds. But the government's financial hole is now even bigger.
(25 August 2005)
Short article.