Power-of-supply reasoning

OP-ED: "The Power of Oil Consumers," by Henry A. Kissinger and Martin Feldstein, Washington Post, 18 September 2008, p. A21.

Steve and I pitching this logic recently in DC to some country's ambassador to U.S. (discussing the feasibility of Development-in-a-Box‚Ñ¢ in this guy's homeland): the power of demand is often unrecognized, whether you talk oil or SWFs' growing demand for good FDI targets (the REAL power in the system right now, dwarfing others).

Here, HAK and Feldstein make a good case for an anti-OPEC. China and India have already discussed (yet another reason to shelve backward talk on a league of democracies). I mean, you want to know why Southwest airlines continues to do well? Hint: they play the futures market well. Securitize your resources and boost the global economy's sense of your long-term demand consistency by reducing boom-and-bust fears.

Development-in-a-Box‚Ñ¢ is all about creating such confident expectations.

(Thanks: Doug Freeman)

Comments

[charlie]

SWA was well hedged until this year, but even they couldn't get decent hedges for jet-A this year.

The other US airlines all use hedging to some degree -- what kept them from doing more was probably financial softness. In any case, none of them are paying retail.

Actually it is European airlines that really benefited. Between a weak dollar and more cash, they were hedged up the wazoo.

[stuart abrams]

How does this differ from protectionism? Interesting that people who ordinarily would not dream of interfering with free trade have no problem advocating "energy independence".