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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Joey Smith who wrote (115753)	6/13/2000 4:55:00 PM
From: Jim McMannis	Respond to of 1579125

RE:"Jim, how does raising US interest rates effect the pricing of a monopolistic/oligopolistic industry structure like oil??? " Oil is used to produce a lot of other things besides gasoline....there is fertilizer, plastics and building materials for instance. A slowdown in the economy will slow down demand for these items and other oil related items. Prices should drop. Of course the effect of interest rates is indirect. The cost of borrowing money increases making it more difficult for companys to grow. The carrying cost of real estate goes up. It effectively gets more expensive. As everything gets more expensive people are less able to consume. There becomes a braking point where the economy just slows down because demand drops. The monopolistic practices of OPEC on the supply side throw another wrench into the equation but that's another story. I thought we learned our lesson on the 70's but time cheap oil healed that wound...but it will likely reopen if oil gets too much higher. Fights over whether or not to drill in the Arctic wildlife refuge and drill in costal areas will reappear. Geothermal and Solar will become big topics again. People will not want to blame themselves for consuming massive quantities of energy and point fingers elsewhere. The governmenment will likely threaten to kick in another windfall profits tax on the oil companies and try begging OPEC to increase output rather than play hardball with their molopolistic practices (all for the sake of the middle east peace)...instead going after domestic companies...like Microsoft. Jim