Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o The US-Israeli attacks on Iran and Iran’s counterattacks will mean drivers pay more to gas up their vehicles. West Texas International crude oil futures climbed roughly six percent to $71 per barrel to start the week on Monday. Roughly 20 percent of the world’s oil passes through the Strait of Hormuz, which borders Iran, and traffic has slowed significantly due to conflict in the area.
It could take several weeks for higher prices to be passed through to consumers. The cost of crude oil is the most significant determinant of the gas price consumers pay. However, other factors include taxes, distribution costs, and refiners' profits. Gas in the United States averages just below $3 per gallon, according to AAA. Gas prices were at their lowest levels in February since 2021. The last global spike in the cost of crude oil followed Russia’s invasion of Ukraine in 2022, where the West Texas Intermediate crude oil futures climbed to roughly $120 per barrel. [The New York Times]
o The Alps have long been a winter destination for tourists, thanks to their legendary ski slopes. However, ski towns throughout France and Austria are at an inflection point as demand for short-term rentals has reshaped these towns. Second homeowners are frequently listing their homes on websites such as Airbnb, with France being Airbnb’s second-largest market after the United States. Investment companies or groups are often buying many short-term rental properties, leaving traditional small inns and chalets scrambling.
As more international travelers visit the Alps – despite the shorter season – resorts are changing their business models to become more luxurious. American tourists are especially attractive, spending time in towns during the traditional European school calendar. Also, some resort towns, such as Chamonix, France, have passed laws to restrict the use of Airbnb and other online platforms. The law permits cities with more than 20 percent of second homes to tax unoccupied second homes and to limit their construction in certain zones. Short-term rentals also need government approval. [The New York Times]
o Many people recognize brands such as Starbucks and Dunkin’ as the leading coffee chains in the United States. The third leading seller is unrecognizable to many – it’s Dutch Bros. The growing chain was founded in 1992 and caters to younger generations, such as Gen Z. Its energy drinks and drink customization appeal to younger customers. Most of the coffee chain’s drinks are served cold.
Customizable energy drinks account for roughly 25 percent of Dutch Bros' business. Starbucks and McDonald’s have added their own lines of customizable energy drinks and cold beverages to their menus. Dutch Bros. increased the number of its shops by 16 percent last year, with plans to expand further into the Midwest and Northeast. [The Wall Street Journal]
o In December, Netflix announced its intention to acquire Warner Bros. Discovery despite Paramount’s competing takeover bid. Two months later, Netflix said that it would not raise its bid, leaving Paramount Skydance with a path to acquire the mega film and television studios.
Netflix’s original offer was for $83 billion. It would have absorbed HBO and its streaming service, HBO Max. However, tensions mounted between Netflix and Paramount Skydance when the latter proposed a $ 30-per-share bid that it claimed was superior to Netflix’s $27.75 bid. Paramount has since raised its bid to $31 per share, with Netflix reportedly not interested in raising its bid. Some advocacy groups have opposed Paramount Skydance’s acquisition of Warner Bros. Discovery because it provides less competition in the media space. [The Washington Post]
o Elon Musk is nearing a $1 trillion net worth, setting the stage to become the world’s first trillionaire. Less than a decade ago, the world had no single person worth more than $100 billion. Today, 18 people top that number, according to Bloomberg’s Billionaires Index. Most of those people have earned their wealth through business ventures that have become household names, such as Tesla, SpaceX, NVIDIA, and Amazon. The Federal Reserve estimates that the top one percent of Americans control roughly 32 percent of US wealth, marking the highest level since World War II.
Over a century ago, John D. Rockefeller became the world’s first-known billionaire. Much of his wealth followed his founding of Standard Oil, a company in which he owned a quarter of the shares. Rockefeller amassed a $1.3 billion fortune by 1915 (equivalent to $40 billion in today’s dollars), which at the time was equal to roughly one-thirteenth of US GDP. [Bloomberg]
