QotD: Gas Prices

For all the whirring of political machinery at home, $75-a-barrel oil will not be wished away by manipulating additives or guaranteeing free ponies to voters. (As of this mid-morning writing, oil has been dropping for two days, and now sells for $71.05 per barrel). As Bradley notes, the United States is facing down Iran, Russia's oil industry has been consistently underperforming, and Iraq is a basket case in the oil export market. Some of these situations are related to American policy, but most of them share an important factor: state control of oil production, a more critical factor than gas-guzzling Americans or the hobgoblin of Chinese demand. "Nature's cupboard has not gone bare," Bradley says. "This is a classic lack of capitalist institutions. It's the role of entrepreneurship to anticipate demand, and that's what you're not seeing. The problem is on the supply side, not the demand side."

The solution there is to let the price continue to rise, which would either encourage more greedy, jowly fatcats to get into the production game or encourage consumers to reduce their oil consumption. Instead, Bush, having diagnosed America's oil addiction, proposes a weird solution: trying to get the addicts a better price for the drug. The oil spike of 2006 is a Seinfeld news cycle, a story about nothing.

Tim Cavanaugh, "Oil Addicts Run Starving Hysterical Naked", Reason, 2006-04-27