Oil Pique

Oil Pique

As energy futures surged again last week, analysts trotted out all sorts of rationalizations for why the world should get used to oil at $100 or even $200 a barrel. Soaring demand because of China and India. Finite supplies being quickly depleted.

Don't buy it for a minute. Ever since the 1950s, when M. King Hubbert began making his predictions about "peak oil," the world has managed to respond to price spikes by finding new oil reserves, new ways to get more oil out of old reserves and new ways to use less oil to accomplish the same purposes -- to say nothing of new sources of energy altogether. And when that happens, the price of oil invariably returns to levels more closely aligned with the cost of finding it and pumping it, to the despair of those who assumed otherwise.

Erin Go Broke

By now, it's a familiar story: easy credit, tax cuts and a booming financial sector stoke a property bubble that fuels a broad economic expansion. Central bank raises rates, bubble bursts, stocks fall, financial sector swoons, and economy slows.

And if you think it feels bad here, it's just as bad in Ireland, where years of unprecedented growth led many to believe that there was no limit to how many immigrants could be absorbed, how high house prices could get or how far standards of living could rise.

At the height of the boom, Irish property prices were doubling every four years and construction represented 25 percent of economic output. When both began to fall, boosters were quick to assure that it was merely a temporary and much-needed real estate correction that would not affect the rest of the economy, whose fundamentals remained sound. Now with home building expected to fall by 40 percent and stock prices down by 30 percent since June, the government is finally proposing to spend $265 billion on public construction to avoid a recession.

Next up: Spain.

Predators in the Skies

American Airlines has been up to its old tricks again -- lowering fares and adding lots of new service to drive out upstart competitors who dare to challenge it in its most lucrative markets.

The latest victim is Dulles-based Maxjet, which had the temerity back in 2005 to offer an all-business-class flight to London's Stansted airport for significantly less than the exorbitant $4,000-plus that American charged on its business-class seats to Heathrow. Two other all-business carriers, Silverjet and Eos, also entered the market and with Maxjet began to eat away the extraordinary profits American earned from its London business, which had nothing to do with the quality of American's service and everything to do with the tight restrictions on flights into Heathrow.

Last fall, American's chairman and chief executive, Gerard Arpey, apparently had enough. American decided to put its own service into Stansted at a special introductory rate of about $1,000, along with lots of extra frequent-flier points. And American's code-sharing partner, British Airways, followed suit by nearly cutting in half its business fares to London. By Christmas, the two had siphoned off enough business that Maxjet, the weakest of the upstarts, was forced to cease operations.

Left to their own devices, AA and BA will keep up the pressure until they have driven all the others from the market and regained the monopoly profit margins they had long enjoyed. Which is why the Justice and Transportation departments should launch a predatory-pricing investigation and make clear that they will never approve the antitrust waiver long sought by the two carriers to further integrate and coordinate their transatlantic service.