Transcripts

"Commentary"-Oil & Digital Technology

SUSIE GHARIB: In tonight's commentary, oil prices and the digital economy. Here's Michael Mandel, chief economist at "BusinessWeek."

MICHAEL MANDEL, CHIEF ECONOMIST, BUSINESSWEEK: More and more we live our lives online. This digital economy is a culture of abundance. Google, Microsoft and Yahoo! compete to attract customers to their free offerings. By contrast, today's high oil prices reflect a culture of scarcity. Experts have to try and figure out just how much crude is left in the world. Until recently, the digital economy was far more important. Spending on information technology was much higher than spending on crude oil. But that's changed. In the first quarter, U.S. refineries spent $500 billion at an annual rate on crude. That comes close to the amount businesses spent on info tech investment. If oil remains high, we will see if the culture of abundance can survive a battle with the culture of scarcity. One possibility is that the high cost of oil will accelerate the shift into the virtual world. Managers will use video instead of flying across the country. And newspapers, faced with rising energy costs for production and delivery, will drop their print versions and go completely online. Or the culture of abundance could falter under the weight of energy costs. The data centers which power the digital economy are big users of electricity. If oil prices stay high, electricity should soon follow and then data centers could come expensive drains on corporate profits. The eventual outcome can't be known until we see whether oil prices are going up or down. But here's one thing we do know. Oil matters even in the digital economy. I'm Mike Mandel.