Aluminum Prices Can’t Keep Up With Energy Costs, Driving Wave of Closures

This article illustrates the long-run effects of an increase in input prices AND how the popular media misuse economic terms (WSJ, Jan 2022).

1. "Rising power prices are causing a shakeout in the aluminum sector, forcing the closure of some plants and tightening global supplies." Aluminum production requires huge amounts of electricity. As the price of electricity increases, the supply of aluminum decreases and, therefore, the price of electricity decreases and the equilibrium quantity decreases. One way that smelters reduce the quantity produced in the long run is to close plants. The increase in the price of electricity reduces profitability below the normal rate, even after the price of aluminum increases.
2. "Based on known closures, Morgan Stanley estimates aluminum supply could fall 1 million tons short of demand in 2022." What Morgan Stanley calls "supply" and "demand" is better called "quantity supplied" and "quantity demanded". 

Americans Should Pay More for Gas, Not Less

America’s fuel-economy rules are inefficient (WSJ, Jan. 2022). Here are two money quotes.

"Economists point out that the size-based feature gives car companies an incentive to manufacture and sell bigger vehicles: to make fuel economy standards easier to meet. There is no clear mechanism in the rule that works to limit the number of gas guzzlers an auto maker sells. There also are several loopholes, such as credit given for technologies that don’t directly improve fuel economy."

"Taxing carbon emissions or gasoline directly, as Europe does, would be far more cost-efficient. An analysis by Prof. Mark Jacobsen at the University of California, San Diego, showed that the cost per gallon saved through the fuel-economy standard is three to six times higher than a gasoline tax. But raising federal gasoline taxes, which have stayed at an inflation-unadjusted 18.4 cents a gallon since 1993, would be political suicide. Carbon taxes are deeply unpopular, too."

AT&T and Verizon Pursue Different Paths Into the Future

 Verizon and AT&T are doing different things.

AT&T is using vertical integration to acquire content and Verizon is looking for ways to monetize 5G.

AT&T may be revising its strategy

1. AT&T Shed Media Assets in 2021. This Year It Wants to Add Investors.
2. AT&T and the Netflix Streaming Crack-Up

Google, Amazon, Meta and Microsoft Weave a Fiber-Optic Web of Power

In the next three years, [our tech giants— Microsoft, Google parent Alphabet, Meta (formerly Facebook ) and Amazon] are on track to become primary financiers and owners of the web of undersea internet cables connecting the richest and most bandwidth-hungry countries on the shores of both the Atlantic and the Pacific.

Earlier posts

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1. 5-forces
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Tim Cook Received Nearly $100 Million in Compensation in 2021

Explain how the compensation package Mr. Cook received from Apple would help to avoid a principal-agent problem (WSJ, Jan. 2022).

Is paying Elon Musk over $6 billion excessive? (Business Insider, Jan. 2022 and Bloomberg, Aug. 2021)

Oil, Uranium Prices Jump Amid Kazakhstan Unrest

Uranium prices surged as protests in Kazakhstan, which produces about 40 percent of the world’s uranium output, prompted the government to resign (WSJ, Jan. 2021).