National Public Radio’s “Morning Edition” was one of few outlets to report that the cost of $100 oil hasn’t had the effect on the economy that many people expected, “at least not yet,” cautioned host Steve Inskeep November 12.
In the first of a weeklong series on oil prices, reporter Jim Zarroli told NPR listeners what was supposed to happen saying, “Time and again, economists from Alan Greenspan on down have warned that oil prices are inflationary … Interest rates go up, borrowing becomes more difficult, and growth slows.”
But, Zarroli also pointed out the unique trend that gets little coverage: Despite the rise in oil prices since March 2007, the economy has continued to grow at a strong pace.
There’s more than one way to survive the rising cost of oil.
For instance, when oil was $23 a barrel, NPR interviewed Jay Bender, president of an injection molding company, who was concerned at the time that he wouldn’t be able to “grow [his] business.”
Cut to 2007, when Bender told Zarroli that back in 2003 he was forgetting that even though manufacturing costs had gone up, “they impact [his] competitors as well.”
Today Bender is “doing well” and says “Sales are continuing to increase” – after setting records in August and October.
Zarroli also talked with Ken Goldstein, an economist with The Conference Board, who told him the U.S. is more efficient with energy use than it used to be, and there are many more alternative fuel options.
So, when oil prices go up, biofuels become more cost effective.
Paul Maidment pointed out in an editorial November 7 for Forbes.com that the U.S. is “[wringing] more economic growth from each barrel of oil consumed,” partly because of development of more energy efficient technologies, and partly because of a changing manufacturing sector.
Maidment said manufacturing has relocated to developing countries like China, and it is their “voracious appetite” to power this manufacturing that is the “swing factor for oil prices.”
“From a cost perspective I don't think that ($100 oil) will be a huge difference. It signals that the economy is robust, otherwise we'd see different price levels," he said.
Stephen Schork, principal of the trading firm The Schork Group Inc. in Pennsylvania, told Bloomberg November 12, “Whether we get to $100 is all psychology … There's nothing fundamental that changed between September and November to get us to $95.”
Although Zarroli reported that recent history has shown the economy “can adjust to rising prices better than people once thought,” other media outlets have been hinting for years that even the slightest increase in oil prices would mean an economic catastrophe.
Back in 2004, the “CBS Evening News” was warning of recession based on oil and gas prices – although ultimately, a recession never happened.
On May 23, 2004, anchor John Roberts said “economists are now warning of a new recession,” if the price of a gallon of gas went “much higher” (than $2.07 at the time).
CBS’s Randall Pinkston then warned, “Financial markets are hoping that kind of price spike will be temporary at best, because the price of energy drives the entire economy. In four of the last five recessions, oil shocks sparked economic downturn.”
Tony Guida reported a dire prediction for the economy on the June 12, 2004, broadcast of the “CBS Evening News”: “Some oil analysts see economic disaster if oil hangs around $40 a barrel.”
He then turned to Peter Beutel of Cameron Hanover, who said: “We are going to see inflationary creep, then we’re going to see a Fed reaction, and then I’m almost certain we’re going to see a recession.”
The Associated Press reported that oil fell more than $1 November 12 after oil minister Ali Naimi, from the Organization of Petroleum Exporting Countries, said the group may discuss boosting production during a meeting in the United Arab Emirates next month.
Check back all this week as BMI follows the NPR series.