I think Brad wrote an article a while back on how bad the level of economic education was in this country.  And recently one of our more notable members had an article on politics and Gas prices (http://lifehappens.joeuser.com/index.asp?aid=172866).  The article itself was a good one, but the comments were more enlightening, and sad at the same time.

The author was lamenting that the leader of the free world (for us egotistical Americans) had to go to other countries with Hat in hand to "beg" for their assistance in reducing oil prices.  You can insert ask, request, cajole, twist-arm, or any other word for beg, but the act and the results would still be the same - Buzz off.

In the comments however, someone quoted one of the Arabs:

I understand supply and demand. My problem is this...Bush says OPEC needs to produce more oil to lower energy prices. (He seems to think its a supply problem as do the rest of Americans.)

OPEC however, says is NOT a supply issue.

"Let me be clear, the high prices which we are witnessing are not because of any shortage of crude oil in the market," the cartel's chief Badri said in an email to AFP."

The quoted OPEC statement itself is asinine.  Supply and demand are not 2 markets that live in isolation of each other, but 2 sides of the same coin or market!  Quite simply, you cannot have a supply without a demand.  We have a huge supply of pollution.  Does anyone call it a "supply"?  No, they call it a problem.  Because there is no demand for it.

Conversely you cannot have a demand with no supply.  Anyone demanding they be given Warp speed?  A lot of people dream of it, but no one is "demanding" it as the supply does not exist.

So to get on a platform and say the problem is not one of supply is just stupid.  The problem (as in almost every market) is that supply and demand are not in sync.  In the case of oil, it is far out of sync.  The reasons are many and varied and worthy of several articles by themselves.

But the sad truth, and ugly, is that demand for oil right now is exceeding the available supplies.  So step 2 in the Idiot dance that we call "Electing a President" is to have a bunch of disengaged mouths talking about weening ourselves off of Oil, and how they are going to "Do it".  They promise a lot, but no one has delivered in the last 35 years (since the first shortage appeared).  Why?

Simple economics! There is no incentive to do it!  We all can say how we must save this, or conserve that, but the truth is we have no incentive to.  Oil is readily available, and at a relative cheap price (in terms of inflation, it has not even reached its peak yet).  As long as it is "cheap" and available, no one, not Al Gore or Rachel Carson, is going to stop using it and by extension, polluting the planet.

Now the price of oil has gotten to triple digits of late.  And the pain is starting to be felt.  With demand rising, and the supply being regulated by an Oligopoly, that has increased prices (Econ 101 - Oligopolies acting as a monopoly can set prices).  And in so doing, alternate fuels, that last year were not readily available or "cheap", are being explored and becoming "cheap" in comparison.  And as oil continues to climb, the alternatives will become "cheaper" and thus entrepreneurs (the Fuel version of Brad) are going to see how to make some fast money - and exploit it!  And develop alternatives to Oil.

It will not come about through legislation.  It will not come about by the government throwing money at "research", since the government has no idea what research is viable, or "economical". It will come from entrepreneurs who have one thing in mind.  How to make some money!  And from the researchers who figure out how to turn water into fuel because they love their work. (Disclaimer: that is just an example, not a path to wealth).

But between then and now, we are going to suffer high fuel prices, and indeed, they are just going to get higher.  Innovation comes from need, not plenty.  And until the need is great enough, the alternatives will not come about.

So when you feel the pain of $3 (other countries pay a lot higher price, so it is still "cheap" here - relatively speaking), just understand.  Your pain today may save the planet tomorrow.  But not having that pain today is not going to do anything for the elimination of the dependence on oil, or of kowtowing to the Arabs.  Nor is the pontification or promises - or hypocrisy - of politicians.

Oh, and one final point to be made.  Many running for president will raise your taxes, and some of those taxes are going to be on gas.  Why?  Simple economics again.  As we drive less (we have actually started doing that), and buy more fuel efficient cars, we will buy less gas.  This is good for your wallet and for decreasing demand to lower prices of oil.  It is not good for the government who - truth be told - cares not a whit about you regardless of what you hear, as they will get less money too.  SO they are going to raise Gas taxes to make up the difference.

And that is just going to cost you more at the pump.  Which is not a bad thing.  Because that will hasten the day that alternative fuels - made viable by entrepreneurs - come to market.