Monetary Policy and Crude Oil: Prices, Production, and Consumption.

• Author: Kliesen, Kevin L.

Monetary Policy and Crude Oil: Prices, Production, and Consumption, by Basil Oberholzer (Edward Elgar Publisher, 2017), 304 pages, ISBN-13: 978-1786437884.

This is an unusual book. It is part literature review, part text book, and part academic research article primarily geared toward macro/monetary economists. From that standpoint, it is a difficult read. Not difficult in the sense that the topic is so esoteric that it is known only to a handful of economists, but rather difficult in the sense that it attempts to weave together a coherent economic narrative from these three parts. It succeeds on some level, but reading it is like reading a 250-plus page research article. It's tough sledding at times.

The book is mostly about monetary policy and crude oil prices, production, and consumption. However, in the first two chapters, the discussion ranges from the Club of Rome and the limits to growth, to Hotelling's rule, to price speculation versus fundamentals, the role of crude oil inventories, to bank credit and traditional bank intermediation, to the shadow banking sector, to the transmission of monetary policy--from both conventional and unconventional policy--and the endogeneity of money. In short, there is a lot going on, and the reader very quickly gets lost in the minutia of academic debates--both philosophical and empirical--that spans multiple cross-sections of the economic and finance literatures. At some point, the findings of article X pitted against the findings of article Y become cumbersome. If there is a reader that wants a comprehensive review of the academic literature, then read the first third of the book. If a reader wants some empirical results, then skip to the middle third of the book. If the reader is looking for the author's policy positions on reducing fossil fuel consumption, then turn to the final third of the book. Most of my comments will concern the first and second thirds of the book.

A second aspect of the book is that it is written under the banner of "New Directions in Post-Keynesian Economics." Admittedly, this reviewer is mostly unfamiliar with this school of thought. Any rudimentary knowledge of the school I acquired in graduate school has long since been fully depreciated. For those similarly unfamiliar with the school, post-Keynesians eschew neoclassical economics and seem to be more inclined to favor government intervention to achieve their policy goals. This view comes through loud and clear in the policy prescription part of the book.

In Part I of the book, the first two chapters present facts and the theory of monetary policy and crude oil. The first chapter is mostly about data. Chapter 2 ("Monetary policy and crude oil: a theoretical analysis") is the meatier of the two chapters and effectively, though at considerable length, provides a foundation for the rest of the book. In particular, the book compares and contrasts the neoclassical approach with an alternative approach (post-Keynesian) in terms of monetary policy, financial markets, and the intersection of the two. In the...