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Graham Watson
onto Microeconomics: IB Economics April 20, 10:36 AM
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As fossil fuel prices soar ‘the era of clean energy security must come of age’, energy secretary will say
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Editorial: The world must accelerate the shift to renewables, regardless of the economic effects of Abu Dhabi’s decision
Graham Watson's insight:
This Guardian editorial argues that the decision of the UAE to leave OPEC might well see lower oil prices, but irrespective of this, it should be taken not as an incentive to consume more fossil fuels, but to consume less because of the social costs, and negative externalities, associated with their consumption.
They argue that the adverse impact, in accelerating climate change far outweighs the benefits of any growth generated by fossil fuel consumption.
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The price of crude oil has swung sharply as uncertainty over the war in the Middle East continues.
Graham Watson's insight:
Same old, same old.
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President Trump said on Saturday that the US had cancelled plans to send a team to Pakistan for negotiations.
Graham Watson's insight:
D&S and oil prices, once again. Geopolitics and the oil market.
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Organic food often costs more than conventional food because it is more expensive to produce. Farmers have higher labor costs, costly infrastructure, and strict certification requirements under the widely trusted USDA organic label. While large farms can absorb these costs, smaller farmers often cannot. Some continue to use organic methods but drop certification due to its expense, losing the ability to market their products as "organic." Although consumers trust the USDA organic label and organic foods may reduce pesticide exposure, the nutritional benefits are less clear, raising questions about whether the higher price is worth it.
Graham Watson's insight:
Another Business Insider clip, looking at the impact of the USDA organic label on the price of groceries. It's interesting because not only does it outline the extra expense, but it digs down to understand what certification means for producers and consumers. It's also a nice history of the organic movement, referencing Rachel Carson's landmark "The Silent Spring".
Clearly organic foods are luxury goods - but the clip looks at whether or not buying organic is worth it.
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The approval came as Donald Trump is to attend a dinner with billionaire Paramount backers the Ellisons.
Graham Watson's insight:
The Warner Bros - Paramount takeover has been approved by the shareholders of the former and looks likely to go ahead. The deal still needs regulatory approval in both the US and the EU, but given that Paramount is backed by billionaire, Larry Ellison, whose son leads the business and he's hosting a dinner with Trump tomorrow. And we know that the President is man swayed more by flattery than reason.
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Trade body warns that changes are likely to drive up costs and push pupils to find somewhere to buy junk food
Graham Watson's insight:
The providers of school meals are warning that proposals to compel them to produce healthier meals are going to drive up costs and in doing so, incentivize pupils to go off-site to get unhealthy junk food options instead.
Remember though, turkeys don't vote for Christmas, and I'm less than convinced about the protestation that high-quality vegetarian options may cost more than some meat-based options. And yes, I'm aware that caterers already have relatively low profit margins; you'd expect them too. It's hardly a high risk sector and you'd hope that there was sufficient competition, in part because price is going to be an important determinant of competitiveness.
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Chemists in England are also charging customers 20-30% more for common hay fever treatment compared with February
Graham Watson's insight:
Another unforeseen consequence of the Iran was has been an increase in the cost of paracetamol, according to pharmacists, with chemists having increased their prices by 20-30%. Higher fuel costs have increased transport costs, both by road and air, so this is manifest in a higher price for the consumer.
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The airline is the latest to cut flights as the US-Israel war with Iran sends jet fuel prices soaring.
Graham Watson's insight:
One of the effects of rising oil and aviation fuel prices is that airlines are looking to ration scarce fuel by reducing the number of flights. In this instance, Lufthansa have announced plans to cut 20,000 summer flights in response to the Iran conflict, with short haul flights being the first to go.
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Malaysia-based Karex produces more than five billion condoms a year and supplies global brands like Durex and Trojan.
Graham Watson's insight:
One of the more unusual examples of derived demand and the Iran war, with the global leader in condom manufacture increasing the price of Durex and Trojan condoms as a result of the war in the Middle East.
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Green light likely for law allowing automatic approval for pavement ‘charging gullies’ to help boost EV take-up
Graham Watson's insight:
The government is looking to make it easier for electric car owners to install home chargers via pavement charging gullies, in the hope that this will boost take up.
The reason that this is significant, currently, charging your vehicle at home is subject to 5% VAT whereas public charging is subject to 20% VAT.
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The previously redacted messages were unveiled as part of an antitrust battle with California attorney general Rob Bonta
Graham Watson's insight:
It seems as though Amazon has been a little bit naughty, with emails released in California appearing to show that it colluded with other firms to raise the price of certain items it sells, including khaki pants, pet treats and eye drops.
My view? If true, the firm should obviously be fined and the people responsible should be imprisoned.
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One petrol retailer says he is experiencing about five drive-offs a week at each forecourt, costing him thousands.
Graham Watson's insight:
Economics is all about incentives, and this is demonstrated in this article which highlights how the higher price of fuel has seen the number of petrol thefts increase, as people drive off forecourts without paying for their fuel.
Not only has the number of drive offs increased by 62% but they are more frequent in poorer areas of the country, and with a higher price of fuel, the loss associated with each theft has increased from £56 to £67.
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As fossil fuel prices soar ‘the era of clean energy security must come of age’, energy secretary will say
Graham Watson's insight:
And as with cars, so to with electricity generation, as the Energy Secretary is about to announce that the move towards renewables is going to be accelerated in the wake of the higher fuel prices caused by the Iran war. This way, it is to be hoped that long-term UK energy security will be enhanced. |
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Government request follows contingency planning to stop planes being grounded if Iran war supply shocks continue
Graham Watson's insight:
The government are clearly worries about the implications of an extended closure of the Strait of Hormuz for aviation fuel and have asked the UK's remaining four refineries to maximise the supply of jet fuel.
Aviation fuel shipments are currently half their normal level at the moment, and even though the UK has strategic reserves, there's a sense that the government needs to get ahead of the possibility of an aviation fuel shortage.
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Downing Street says focus will remain on cutting bills, backing renters and lowering energy prices
Graham Watson's insight:
The government have denied that they are going to be imposing a rent ceiling on private rents as part of the strategy to tackle the cost of living crisis. However, just because they're not going to do it, it doesn't mean that you shouldn't be reviewing how you'd go about modelling a rent ceiling on a D&S diagram, or evaluating its impact.
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Scientists and economists will help countries develop plans to reduce dependence on oil, gas and coal
Graham Watson's insight:
A number of countries are meeting in Colombia to discuss the green transition, and there's been agreement on the need to form a panel of experts to guide the green transition.
A worthwhile development or more hot air? Can you see what I've done there...
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The cuts, which employees had been expecting for weeks, will be Meta's largest layoff since 2023.
Graham Watson's insight:
An amusing example, but entirely predictable case of where AI is replacing labour, in the tech sector, with Meta planning to lay off 8.000 workers and increase spending on AI. In this instance, labour and capital are substitutes.
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Industry groups dismayed at hints policy will not be in king’s speech, as touts make huge sums from BBC Radio 1 event
Graham Watson's insight:
A classic stretch-and-challenge question is to ask whether ticket touts increase or decrease economic efficiency. However, what's certainly true is that they drive up the price of tickets and limit their availability to the wealthiest members of society.
The UK government has pledged to tackle the issue. However, the prevailing mood music would suggest that the government doesn't see this as a priority.
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Simon Roberts says support for bills on back of Iran war should include ‘food growing, manufacturing and retailing’
Graham Watson's insight:
The boss of Sainsbury's has urged government intervention to lower the energy costs of food producers to keep food prices lower than they would otherwise be. Superficially, this seems to be in the public interest but be careful: firms often us inflation to make price increases that simply don't disappear when costs fall back to a more normal level. Think about what has happened to petrol prices post-Ukraine, for example.
Even the article notes that Sainsbury's annual profits were up 1.1% on the previous year - so despite a warning of lower profits this year, the company itself is doing OK.
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Brussels will relax state aid rules to allow member countries to offer ‘targeted and temporary’ support
Graham Watson's insight:
It looks like the EU is going to permit member states to temporarily cut electricity taxes to reduce the extent to which energy bills increase across the Eurozone. It's also allowing for targeted interventions to help mitigate the cost of living crisis.
Simultaneously, it's also looking to co-ordinate action across the Eurozone and ensure that there are sufficient strategic reserves of gas, in particular, whilst looking to encourage the green transition to boost energy security.
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Ministers also asked to alter compensation rights and suspend emissions trading scheme amid Middle East war
Graham Watson's insight:
Airlines UK, the aviation industry body, has already started to lobby the government for relief from various forms of intervention, asking for relaxation of noise rules, the suspension of compensation rights and the emissions trading scheme and cuts in fuel taxes in response to the Iran war. I admire their brass neck.
The chief characteristic of running a business is risk: in short, airlines seem to be asking for a one-way street where all of the risk in the sector is shifted away from them and onto consumers and the taxpayer. Were I involved in negotiations, it would be a short meeting. And then, of course, they'll start playing governments off against one another, and threatening to withhold future investment. But it doesn't make this initial approach right.
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The government’s plan to de-link gas and electricity prices will have a modest effect – more promising are plans on EVs and heat pumps
Graham Watson's insight:
Nils Pratley's analysis of the plans to de-link gas and electricity prices won't have as much of an effect on electricity prices as some might hope. However, he does note that increased emphasis on encouraging the take up of electric vehicles and heat pumps is perhaps better placed to succeed.
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The consultancy Teneo says airspace restrictions caused by the conflict have forced airlines to reroute many flights.
Graham Watson's insight:
The first signs of the effect of the Iran war on the cost of air travel are becoming apparent, with consultancy Teneo, reporting that flights are now 24% more expensive than they were a year ago.
You should be able to illustrate this using D&S analysis and talking about the demand for oil being a derived demand.
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Output from solar farms rose by a third while electricity from fossil fuels fell, research from thinktank reveals
Graham Watson's insight:
The thinktank, Ember, have reported that last year the increased output from renewable energy sources increased by more than the total global demand for electricity. Solar power generation increased by a third last year, largely driven by new Chinese capacity. In contrast, electricity generated from fossil fuels fell by 0.2%
This is the first time that new renewable capacity has been able to entirely account for increased demand.
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The war in the Middle East has brought renewed attention to Britain's vulnerability to energy price shocks.
Graham Watson's insight:
I've already 'scooped' this but it seems that the government is going to break the link between gas prices and the electricity price, by altering the nature of the contracts agreed between older renewable power generators and the government, fixing the price of power rather than allowing it to be determined by the price of gas, which recent events have shown to be much more volatile.
In theory, it should result in lower energy bills, but as is ever the case, we will see. |
And as with cars, so to with electricity generation, as the Energy Secretary is about to announce that the move towards renewables is going to be accelerated in the wake of the higher fuel prices caused by the Iran war. This way, it is to be hoped that long-term UK energy security will be enhanced.