Newspaper article The Journal (Newcastle, England)

Columnist

Newspaper article The Journal (Newcastle, England)

Columnist

Article excerpt

Byline: BERNARD TRAFFORD

I'M not an economist. Though I run what is by some definitions an SME, can read accounts and follow balance sheets, I don't understand how the national financial wheels turn.

Still, over the years I've grasped some principles of economics, succinctly defined as "the study of the allocation of scarce resources". It's sometimes called a "dismal science", because it identifies harsh realities. Unlike politicians, economists don't believe they can have jam tomorrow if they haven't prepared for it today. They believe in consequences, and in opportunity costs. There's nothing for nothing; or, as that most famous of economists, the late Milton Friedman, put it: "There's no such thing as a free lunch".

It's an ill wind that blows nobody any good; an economist might have written that old proverb. Current falling oil prices are serving to reduce the cost of living. Heating oil, petrol, diesel, the transport that gets to the shops all the things that we buy; even the cost of delivering stuff we've ordered online. All are tumbling.

That should be good news.

Prime Minister David Cameron urged employers whose costs have shrunk to share the benefit with their hard-pressed employees; after all, most have had precious few pay rises or good news in recent years. His opponents ridiculed him: I think he might have a point.

Low oil prices are, of course, bad news for the petrol companies. While Saudi Arabia produces more oil than the world needs, forcing the price down, Western oil companies are feeling the draught. You might say that's just business; it's how the real world works.

UK-based oil companies don't like it at all, however, demanding government intervention. They add a thinly veiled threat. Only last week it was suggested that, if government doesn't do something to help (for example, cut the duty charged on petrol and oil), they might close down oil wells and sack employees.

It gets worse: once closed down, these wells won't be reopened even if the price rises. We're warned they'll be closed off for good, the untapped oil still trapped in the ground.

Hold on a minute! …

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