William, I think the SJMercury News article is alarmist. Why single out the electronics industry as being affected by higher energy prices? I remember reading an Intel
executive saying the cost of energy to their operations
is a miniscule percentage. Additionally, electronics can make almost everything more energy efficient. High energy prices may actually stimulate demand for chips.
Business Week addresses the concern and gives a few numbers.
> To see where energy bites, start with the U.S., the world's biggest energy consumer. Overall, the U.S. economy remains in excellent health, with growth expected to top 5% again this year and unemployment just over 4%. And though consumers paid 19% more for energy in July than they did a year earlier, contributing to a 3.5% annual rise in the Consumer Price Index, that hike has not significantly driven up the cost of other consumer goods. The core CPI, excluding food and energy, rose a modest 2.4% through July. The major reason: The New Economy has been so productive, it's overwhelmed the negative effects of costly energy, says John A. Tatom, a Chicago-based economic consultant.
But that could change as oil prices move. The U.S. forecast of Standard & Poor's DRI, a sister company of BUSINESS WEEK, is for continued healthy, noninflationary growth. DRI expects gross domestic product growth to slip to 3.6% next year, inflation to drop back to 2%, and unemployment to rise to 4.5%. That's assuming oil is around $30 a barrel the rest of this year and falls to $25 by the end of 2001.
If oil were at $20 throughout the period, things would have been a little better. DRI says 2001 growth would have been 3.8%, inflation 1.8%, and unemployment 4.4%. But if oil heads up to $40 throughout the period, the bite could be much stiffer. Then, 2001 growth would drop to 3.2%, inflation could hit 2.3%, and unemployment 4.7%.<
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Crude oil price forecasts are notorious for being all over the place, though. Less than 2 years ago crude was $10 and forecasts varied between predicting a further drop to $5 and a rise to normal near $18-20. Historic inflation adjusted price has been around $18.
Gottfried |
