December 25, 2005

REVOLUTIONARY! (via Mike Daley):

Capacity Constraints (Irwin Stelzer, 12/19/05, Sunday Times of London)

If the Federal Reserve Board's monetary policy gurus have any doubt that "possible increases in resource utilization … have the potential to add to inflation pressures", as they said in last week's statement accompanying their 13th consecutive increase in interest rates, they need look no further than Shell Oil's announcement the following day.

The new consensus that crude oil prices will stay at or above $50 per barrel has had several consequences. Like its oil-industry competitors, Shell has upped its exploration and development expenditures, in its case by 27% to $19 billion. Kuwait has decided to draw on Western expertise to help it develop its untapped reserves, which look a lot more attractive at $50 than they did at $10. Other oil companies are scrambling for drilling rigs, labor and supplies.

So because gas costs more right now they're looking for more of it--that's never happened before, huh?

Posted by Orrin Judd at December 25, 2005 11:08 PM
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