[1010RD]

Why build new plant, if you can squeeze another year out of the old? Likewise, new trucks, new earth-moving equipment and all the rest.

As long as your productive assets are growing faster you'd always buy a lower priced plant/land/equipment. Think about it for a minute.

Unless your variable costs were above your profit why wouldn't you lower your fixed costs? Even more so if deflation were being driven by improved productivity, which is much of what we're seeing now in oil prices. New methods of extraction made previously unprofitable oil plays profitable.

[Riflema]

On fracking, 'fraid not. Fracking was a response to $100 oil. The price fall is down to good old supply and demand and a dash of Saudi power politics, not the "efficiency" of fracking. Fracking arose because $100 oil made it profitable, now we'll see the wells start closing since there's not profit to be made in that game below $60/barrel.

And no-one is suggesting that price falls due to increased productivity are a problem, what is a problem is the same product, made with the same inputs, at the same costs, selling for less next year than this.