$this->bbcode_second_pass_quote('', 'W')hat's more, that number from the editorial -- 4% of daily oil production -- rang a bell in my head. I couldn't remember why at first, so I did a little research.
Turns out we don't have to wait around for a real-life opportunity to test the ShockWave theory. We've already heard the supposed death knell sounded out by such a 4% supply shock.
Think back three years. "Yellowcake" still had merit apart from Betty Crocker; and Saddam hadn't yet selected his spider hole. Then on March 20, 2003, U.S. forces invaded Iraq. And yes, oil exports dropped to nil. In both January and February 2003, Iraq supplied 2.5 million barrels of crude per day. By April the number was literally decimated, down to 200,000.
Just three days later, on March 23, the strife in Nigeria flared up, compelling big oil to pull out workers responsible for more than 800,000 barrels per day.
Together the shortfall came to 3.1 million bpd, or 3.9% of that year's daily production. A month later, neither situation had improved much. Yet prices for oil on April 29 were 33% lower than just before the war in Iraq began.
Oh, and I guess economists are smarter than the guys at
My point in dredging up old facts is simply to say that the Times' claim demands skepticism. But it's hardly fair to single out this instance of conventional "wisdom" gone astray. The $161 editorial is only one symptom of a way of thinking that's endemic.
