Will rising oil prices help Texas?

Oil prices help Texas rake in $10.7 billion surplus http://www.chron.com/disp/story.mpl/front/5759857.html

The article seems to imply that the Texas economy and state budget will be helped by high oil prices. Wrong.

Rising oil prices will keep Tx relatively better off then other states, but the economy will still get worse. Anyway, it is likely that most of the oil income leaves the state - Exxon stock is not owned exclusively by Texans.

"If Combs' early forecast holds up, Gov. Rick Perry would like to return part of the money to the taxpayers in the form of tax cuts or rebate checks, spokesman Robert Black said."

So the people who don't work for oil and gas can afford to fill up their tanks? (Can't have the money as a reserve for a rainy day, gotta get it out there where it can find the quickest route to wall street, china and Saudi Arabia, and Exxon.)

So if gasoline goes up to $10 a gallon, Texas will be doing just fantastic, even better than ever, right? No, this statement is the usual superficial bull from politicians.

The US uses 21 million barrels of oil a day. Texas produces 1.1 million barrels of oil a day. (The US produces 5M) https://www.cia.gov/library/publications/the-world-factbook/rankorder/2174rank.html http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm 21 / 300 million us population = .07 million barrels/day per million people Texas population = 23 million X .07 = 1.61 million barrels/day used by Texans (if you assume that Texans use an average amount of oil, which with big cars, long distances and little public transport is unlikely)

Texas isn't even energy independent, and it is the highest producing US state. Texas is a net buyer of more expensive oil, higher oil prices will hurt not help. Texas has diversified away from Oil in any case, and it is dependent of the rest of the US and world economy.

Besides, the reason the price is going up is because demand is exceeding supply. If Tx has extra bucks, it should spend it on something useful like alternatives.

(The first link above in interesting. I find it fascinating that all of Asia, with 3+ billion people uses the same amount of oil as the US, with 300 million.)

'But, he added, the governor wants to keep Texas' economic engine "going and growing."'

Not gonna happen, Gov. The economy cannot grow while energy use declines or stays stagnant. However, if you want to play math games with economic statistics, maybe then you can call it growth ...

Government statistics on employment and economic growth are political documents, not reliable data.

Employment data uses the birth-death model to add hundreds of thousands of non-existent jobs: http://globaleconomicanalysis.blogspot.com/2007/05/birth-death-model-fatally-flawed.html

Inflation is underreported for many, many reasons. Therefore, since economic growth is adjusted for inflation, economic growth is routinely exaggerated.

So, if you read that the Texas or US economy is growing, take that with a grain of salt.

Stealth Inflation

David Jensen explains how the Fed can expand the money supply at twice the rate of economic growth, over a period of decades, all the while keeping price inflation low (so far ...)

DECEPTIVE WARNINGS - Nearing Economic Disruption, the Fed Distorts Perception by David Jensen December 8, 2005

Selected exerpts:

"It appears that the Fed believed that it was free from constraints of moderate money supply stewardship because of a confluence of several factors:

• The importation of cheaply priced Chinese consumer products produced with the benefits of $0.50 hourly labor rates and lax environmental and labor laws created a wage pressure mechanism to temporarily contain price and wage increases in the US economy;
• A belief that skewing inflationary perception could contain consumer inflation expectations and thus limit activities such as hoarding and forward-buying that spur inflationary pressures if price inflation is detected;
• A reliance, in the late 1990s, on temporary increases in economic productivity to helped contain price pressures; and
• Starting in the late 1970s and continuing through the 1990s, liberalization of financial markets (as identified by Peter Warburton in his book “Debt and Delusion”[10]) allowed the massive pools of capital (money) that were created by Central Banks (US, European, Canadian, etc.) to move into financial instruments such as bonds, stocks, currency markets, and derivatives. This inflated the values of these markets, drew further investment, and hid the monetary inflation of the central banks as consumer goods prices increased relatively slowly in comparison. According to Warburton, the world bond market grew from $1 trillion in 1970[11] to more than $50 Trillion today. World stock market capitalizations now approach $30 Trillion; during the first 6 months of 2005 alone, financial derivatives grew 16% (or at a compounded 35% annual rate) from $9.45 trillion to $11 trillion[12] and through financial gearing now exceed $270 trillion in underlying asset value - more than 500% the world’s total annual GDP; and the world’s currency trading markets now generate $2 trillion in activity or roughly 17% of the US’ total annual GDP, per day. These ballooning financial repositories, now totaling more than $100 trillion, absorbed waves of capital created by central banks with their elastic currencies thus temporarily mitigating the inflationary impact on consumer prices and seemingly creating a Shangri-La economy.

The above factors are not long-run factors that can continue indefinitely to contain pricing pressure post decades of aggressive expansion of the money stock by the Fed and other Central Banks. Because the money stock growth has been hidden with temporary techniques, whether the Fed reports M3 in the future misses the point entirely. Inflation has already been created but hidden with temporary market phenomena and measures.

All this new money got sucked up into the stock market, then real estate, and now what? Commodities?