Crude oil price compensation
The public and, above all, the trade unions repeatedly call for higher wages when the cost of living has risen for the car-driving masses as a result of higher gasoline prices. – The increase in the price of oil, however, is a transfer of real income to foreign countries: money that can no longer be distributed domestically. To use the language of financial journalists, it has been “swallowed up”. In this respect, an “offset” would immediately lead to inflation. – Moreover, such an equalization of purchasing power would violate the Second Price Law (high price – pushes back the demand [here especially also: by more economical use of oil] and – attracts the supply of the good as well as – the production of the substitute [here for example: nuclear power, coal, wind turbines, solar panels, electric motors]) out of force, which is contrary to economic reason. – See biofuels, petroleum inflation, petroleum price, inflation compensation, purchasing power compensation, climate inflation, wage, indexed, wage-price spiral, oil bulletin, oil price, petrodollar, protein inflation, real cash effect, ripples, electricity price, second-round effects. – Cf. ECB Monthly Bulletin of July 2004, p. 32 (second-round effects), ECB Monthly Bulletin of July 2005, p. 14 ff. (analysis of the effects of a price increase; tables), ECB Monthly Bulletin of February 2006, p. 38 ff. (pass-through to the HICP; price elasticities; pp. 41: empirical rule of thumb: 10 percent increase in oil price leads directly to 1.5 percent increase in consumer prices), ECB Monthly Bulletin of November 2006, p. 15 (trade balance surpluses among oil-exporting countries), ECB Monthly Bulletin of January 2012, p. 49 f. (annual oil price increases of just over five percent absorb income growth; explanations).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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