Effect of an Energy Price Increase on Real Economic Growth

Just as labor is an important input in the production of goods and services, so is energy. An increase in the price of energy reflects a relative shortage of energy from what previously was the case. Just as the price of labor can increase from an increase in demand or a decrease in supply, so, too, can the price of energy.  Assume that before an increase in the price of energy, the economy was set to accelerate from 3% growth to 4% growth.

Assume that the increase in the price of energy has resulted from an increase in the demand for energy (that is, the energy demand curve is shifting out). At the higher price of energy due to increased demand, the economy will not physically be able to rise in growth from 3% to 4% that otherwise would have occurred.

Now assume that the increase in the price of energy has resulted from an interruption in supply (that is, the energy supply curve is shifting back). At the higher energy price due to a supply interruption, the economy will not physically even be able to maintain its current 3% growth, much less accelerate to 4% growth.” ~ Paul Kasriel

Paul Kasriel is the recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy

The policies of the Obama administration, the DOE, the DOI, the EPA are without doubt reducing the supply of energy in the U.S. and taxes on energy and energy companies are compounding the problem by increasing the price to consumers.  Obama has openly stated that his policies will cause energy prices to “skyrocket,”  which also means that economic growth and productivity will crash.  Is this the change you wanted? ~  Bud 

http://www.northerntrust.com/pws/jsp/display2.jsp?XML=pages/nt/0601/1138283681241_6.xml&TYPE=interior&er=ecDetail&c=primary/resource/1102/1298917803339_176.xml

Government Motors plan for sales growth of all electric Chevy Volt is in conflict with government plans to shut down, tax and regulate energy.

October 8, 2011 at 3:42 am
Originally published on October 7, 2011 at 6:08 pm

About budbromley

Life sciences executive, retired
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One Response to Effect of an Energy Price Increase on Real Economic Growth

  1. Pingback: Energy Rocks Our World: Reprise | budbromley

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