How to Hedge for Peak Oil Shocks

Posted by Ian Cooper - Wednesday, December 15th, 2010

Let's see.  You can follow the good advice from the editors of Pure Asset Trader, The $20 Trillion Report, and Crisis and Opportunity, or you can check out the latest report from the American Enterprise Institute for Public Policy Research.

Here's more from AEI's latest report.

"Many policymakers and pundits have argued that the United States should become "energy independent," in the wake of the rise in oil prices to more than $145 per barrel in summer 2008. In this Outlook, I investigate the economic benefits of domestic oil production by comparing the effects of oil shocks on energy- and non-energy-producing states in the United States. The results show that an increase in oil prices reduces economic activity in nonenergy states, but not in states where energy production constitutes more than 5 percent of gross state product. Oil shocks increase unemployment and reduce the number of jobs in non-energy-producing states, but they do not have a significant impact on unemployment or employment in energy-producing states. In some cases, an increase in oil prices actually reduces unemployment and creates jobs in states with a significant energy sector. Overall, the analysis shows that increasing domestic fossil-fuel production could potentially reduce unemployment, create jobs, and help jump-start the U.S. economy out of the Great Recession.

Key points in this Outlook:

  • Increases in oil prices have frustrated consumers and led to calls for U.S. "energy independence."
  • One of the best ways to combat rising oil prices is expanding domestic fossil-fuel production.
  • This can actually reduce unemployment and create jobs in energy-producing states--and help steer the United States out of the recession."

Read more here.


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