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Scooped by
Graham Watson
onto Microeconomics: IB Economics April 29, 2024 2:56 PM
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Levy on oil and gas majors in richest countries would help worst-affected nations tackle climate crisis, says report
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Governments in countries heavily reliant on Middle Eastern oil introduce measures to shield public from soaring costs
Graham Watson's insight:
Is this worth scooping?
I don't know, it simply reaffirming how changes in economic variables affect lives - in this case how a scarcity of oil has resulted both in changes in the market price of energy more widely and the non-market methods adopted across Asia to ration that scarce resource: 4-day working weeks, a ban on air-conditioning, changing the blend of biofuels and subsidising fuel to make it more affordable.
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NRMA says record-high fuel may be here to stay in Sydney, Melbourne and Brisbane after prices soared early in the Middle East conflict
Graham Watson's insight:
An echo of the period immediately prior to COVID, with fuel shortages starting to affect Australian petrol station, and consumers engaging in panic buying. You should be capable of defining what is meant by a shortage and aware of the implications of shortages for resource allocation more generally.
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Yara’s Svein Tore Holsether says it would be ‘catastrophic’ if the strait of Hormuz was closed for a year
Graham Watson's insight:
The same point about derived demand made by the boss of a fertiliser manufacturer.
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Trade body attends Reeves meeting, hours after saying it was pulling out over suggestions of ‘price gouging’
Graham Watson's insight:
Today's meeting between the government and petrol retailers might have been a little bit testy - with the latter claiming that the government's rhetoric had inflamed matters. That and the billion pound profits of the oil companies, perhaps.
However, the Competition and Markets Authority are already investigating the sector, and they've also put the market "on notice" that they are closely scrutinizing current price rises to ensure that price gouging doesn't occur and we don't see a repeat of the 'rocket and feather' pricing that accompanied the start of the Ukraine war.
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TfL are also poised to increase 20mph zones and cut speed limits on the capital’s fastest roads later this year
Graham Watson's insight:
It seems as though the drivers of SUVs could be about to face higher charges for driving in London. Rightly so, in my view - they impose greater social costs than regular vehicles, both in terms of air pollution and the cost of road maintenance, never mind the fact that evidence suggests they pose greater danger to pedestrians.
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Caviar used to be so abundant in American rivers that bars gave it away for free. Today, a single ounce can cost more than $250. Its high cost is a result of its scarcity. But over the last decade, China has exported more caviar than any other country in the world, flooding the market. So why hasn't caviar gotten much cheaper? We visited a Michelin-starred restaurant in New York and a small American producer's processing room to see how the tides are shifting in the industry.
Graham Watson's insight:
This Business Insider clip looks at the price of caviar, and notes that now that China has entered the market, the supply of caviar has increased. You would have thought that this would have lowered the price of caviar, but that's not the case.
It's quite a nice look at the history of caviar consumption, from the time of abundance, and bars giving caviar away to today's market for caviar. It's a good example of a luxury good.
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Cathay Pacific, AirAsia and Thai Airways join Qantas in increasing prices, as travellers flock to airlines that don’t have Middle East stopovers
Graham Watson's insight:
Some interesting microeconomics here in the form of changing levels of demand for different Asian airlines as passengers look to avoid flying via Gulf States, but equally it's interesting from a costs and revenues perspective, in that some firms have already factored in higher fuel costs, whereas others are going to impose a fuel surcharge.
Any change in variable costs and revenues will, of course, mean a change in the equilibrium price and output, and, by definition, profit.
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From
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Women in the economy means growth. Women in the economy means wealth. Women in the economy means jobs. Despite decades of progress, men remain far more likely than women to hold positions of political, social and economic power.
The World Economic Forum’s 2025 Global Gender Gap Report shows that full parity remains 123 years away. We spoke with three experts in government, diplomacy and economics on why the gender gap, even in the 21st century, persists. A key takeaway? Laws alone won’t work. Real equality must be lived.
Graham Watson's insight:
This World Economic Forum clip highlights the lack of recent progress towards gender equality, noting that increasingly it is structural factors that are impeding progress, to the extent that current estimates are that it will still take over 120 years to reach full parity.
In fact, for all the changes to labour law, it's social and cultural factors that determine inequality.
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Exclusive: Oil at $100 a barrel means higher prices in the EU and UK, making savings for those with electric vehicles even greater, analysts say
Graham Watson's insight:
The Transport & Environment (T&E) thinktank have quantified the cost of higher fuel prices for European motorists, so that you don't have to.
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From
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It is 'impossible for us to compete', says the boss of a New York grocery store.
Graham Watson's insight:
This is a really interesting look at whether or not it is possible for independent grocery retailers to compete with larger, established supermarkets, highlighting some of the economies of scale - notably bulk-buying - that enable them to offer lower prices.
In summary, the small grocer is calling out the relationship between wholesalers and retailers, arguing that price discrimination in favour of the larger chains is anti-competitive and makes competing on price impossible, therefore making markets less competitive and reduces consumer choice.
I suspect that large retailers would say that quantity discounts aren't unreasonable and that smaller retailers have a number of non-price advantages such as location that should enable them to compete.
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Exclusive: Report suggests only 1% of annual spend on food and drink adverts will be affected after industry lobbying
Graham Watson's insight:
There's a suggestion that the recent ban on junk food advertising is going to prove to be ineffective, largely as a result of lobbying by industry insiders. If that's the case, then could this be an example of government failure, in as much as the marginal cost of the intervention is less than the marginal benefit and the net outcome is a reduction in economic welfare?
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Anglian, Southern, Wessex and South East allowed to raise charges more than originally allowed by watchdog
Graham Watson's insight:
It appears that the regulator has relented and allowed a group of water companies to raise their bills by more than originally agreed.
Anglian, Northumbrian, Southern, Wessex and South East all appealed against the original ruling and have now been allowed to increase their bills by an average of an extra 2.2%. The original December 2024 ruling fixed price rises at 36%, with the average bill reaching £597, to help pay for maintenance and investment.
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US among three countries so far backing measure triggered by Middle East war, according to reports
Graham Watson's insight:
And the D&S solution to rising oil prices - releasing fuel from emergency reserves to try and stabilize the oil price. |
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Head of world’s energy watchdog says it will take time for markets to recover from ongoing crisis in strait of Hormuz
Graham Watson's insight:
The International Energy Agency (IEA) have suggested that they might consider releasing more strategic oil reserves to try and calm international markets and lower oil prices.
One problem: you can only sell oil reserves once.
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From
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Households have faced a sharp rise in the cost of heating oil since the outbreak of the US-Israeli war with Iran.
Graham Watson's insight:
Another government intervention, this time to offset the costs of the war in the Middle East and its effect on the price of heating oil that's soared in the past few weeks. Evaluate it with the usual tools: opportunity cost, government failure, distributional effects.
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Prices of crucial farming inputs such as fuel and fertiliser skyrocketed just before the spring planting season
Graham Watson's insight:
A fantastic example of the concept of derived demand, with the derived demand for oil in food production clear from its use both in fertiliser manufacture and in ensuring that we've got a supply chain in the sector. And if oil prices rise, then that's also going to mean higher food prices too.
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As energy prices tripled in the 1970s due to Middle Eastern wars, Scandinavia, France and the Netherlands sped up green transition
Graham Watson's insight:
The Guardian suggests that we should learn the lessons of the original oil crisis of 1973-74 and be more decisive in moving away from fossil fuels in favour of renewable energy.
This article highlights the nations that did this first time around and the different ways they did so: the Danes by investing in wind power; the Dutch by building cycle lanes; the French turning to nuclear power; Scandinavians in insulating homes better and focusing on energy efficiency. The sad thing is that the recent experience of COVID would suggest that we - the Anglo-Saxon world - fail to take chances such as this.
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From
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Ed Miliband says the competition watchdog is primed to intervene if firms use the oil price shock to "rip off" customers.
Graham Watson's insight:
The government is meeting with petrol retailers today to tell them that profiteering from the current Iran conflict is not on. Alas, they're a week too late - another penny on fuel overnight and a 10p increase in petrol prices since the start of the crisis suggests it's already happening.
Oil is bought in forward markets - so the fuel that's currently being sold at the pump was bought at least 6 months ago has been stored in Rotterdam or somewhere similar. The oil companies will no doubt claim that current price increases are smoothing out the effect of higher costs; however, during the Ukraine war they were accused of 'rocket and feather' pricing; increasing prices extremely quickly and then taking their time in lowering them back down again. Of course, the prevailing market structure means that this sort of behaviour is likely.
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Campaigners say people unlikely to ‘look favourably’ on package for Wael Sawan, which rose to £13.8m in 2025
Graham Watson's insight:
One of my favourite areas - executive pay - with the boss of Shell seeing their salary plus bonuses rise by 60%, despite the fact that profits fell by 22%.
The standard defence is, as ever trotted out: "The CEO’s pay is commensurate with his position at a major global energy company and one of the FTSE’s largest companies. Around 80% of the CEO’s target total package is linked to performance. Since he took over as CEO at the start of 2023, Shell has delivered strong financial and operational performance and outperformed its peers with total shareholder returns of 19% per year.”
Make of that what you will.
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From
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The water supplier is set to pay a proposed £44.7m after "serious and unacceptable" sewage breaches.
Graham Watson's insight:
OFWAT have hit Welsh Water with a £44.7m penalty for failing to "operate, maintain and upgrade its wastewater network to ensure it could cope with levels of sewage and wastewater". The net result has been marine pollution and the company is being punished for this.
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Despite rare act of multilateralism, there is no guarantee the IEA’s release of 400m barrels from reserves will depress prices
Graham Watson's insight:
Given today's moves on global oil markets, it's already almost too late to scoop this. However, I've done so because a number of wise heads were quick to suggest that even the release for 400m barrels of oil from strategic reserves might not bring down the oil price to the extent that you might have thought.
This reflects the net effect of releasing the reserves against the loss of oil coming through the Strait of Hormuz as well as the impact that using these reserves might have on confidence in the market.
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From
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It comes as Iranian attacks on ships intensify in the crucial Strait of Hormuz waterway.
Graham Watson's insight:
More Iran/oil price related news, with concerns about the viability of shipping via the Strait of Hormuz, and in spite of IEA agreement to release up to 400 million barrels of oil from strategic reserves, oil prices have risen this morning. It implies a longer period of disruption to global supplies and higher fuel prices at the pump.
(Again, I note that the price of a litre of fuel has reached 138.9p at the garage I pass on the way to school, up nearly 10p since the conflict started.
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From
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The G7 group of nations welcomes the idea of releasing oil in response to the surge in prices since the US-Israel war with Iran began
Graham Watson's insight:
Lots of starting points - D&S, buffer stocks, the impact of oil prices on the global economy, PED and PES...the world's your lobster.
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Rachel Reeves said to be considering levy cuts for oil and gas firms, but economists say this would just fatten profits
Graham Watson's insight:
The current windfall tax on North Sea fossil fuel producers has been in the spotlight, with the Conservatives calling for its withdrawal in the wake of the Iran conflict. However, this Guardian article suggests that this wouldn't affect oil prices because of the nature of the tax. This is because it is a tax on profit, not a tax per unit of output, and so they cannot pass it on to consumers.
Equally, the notion that its removal is going to unlock investment in the sector is also fanciful according to Alex Chapman, a senior economist at the New Economics Foundation. He suggests that higher prices are going to generate higher profits and it is these that should be used to invest in the sector rather than comparatively small tax breaks.
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From
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The price of crude has surged above $100 on concerns about shortages due to supply disruptions.
Graham Watson's insight:
Asian governments have already started reacting to higher energy prices by a variety of methods. South Korea has already announced that it will adopt a maximum price for fuel products, and Thailand has followed suit for the next 15 days in the diesel market, whereas Vietnam has scrapped import duties on fuel.
Elsewhere, Filipino public offices are going to run a four-day working week and Bangladesh has closed its universities to temporarily save fuel.
It will be interesting to see what the developed world, via the meeting of G& finance minister agrees later today. |
Who'd have thought it: taxing fossil fuel firms could help raise $900bn in so-called climate finance by 2030 according to the Climate Damages Tax report published today.
But before you celebrate this too gleefully, remember that it's likely to be largely funded by higher energy prices being paid by consumers, so don't get too giddy.