Q&A Friday #92: Should We Want High Oil Prices To “Drive Us From Oil?”

Question: “Compromise on Drilling: In today’s “Drill and Conserve“, Charles Krauthammer called for both drilling, conservation and pursuing alternative energy sources. Although I usually find a lack of reason with the Democrats, I think in this case they are very reasonably concerned that drill-now really will provide short term relief on oil prices. This, in turn, will relieve the current pressure that is spurring development of alternatives. The fear then is that we will go another generation before do anything. (Of course, they cannot admit that they think the high prices are ‘good’ – it would be political suicide.) My question for you is what I would like to ask Krauthammer: Can we really do both? Aren’t the high prices the only thing that will drive us from oil? A few months of 4$ gas has sold more Priuses than 30 years of CAFE standards.” — oldch

Answer: You may not realize it, but you sound like you’re wondering if we’d be better off with an old, Soviet style command and control economy where the government directly controls the market.

The reason I say that is because what’s happening now is that the market is doing what it always does; the price of gas has gone up and in reaction, people are driving less, looking for more fuel efficient cars, and pushing for drilling to increase the supply.

Why is that occurring when the high price of gas will spur the development of alternatives?

Because people value cheap gas over developing alternatives. That’s why advocating high gas prices would be political suicide and it’s why Democrats like Barack Obama and Nancy Pelosi lie through their teeth about what they want to do; it’s because unlike the American public, they do put a higher value on getting us off of oil than they do on having cheap, efficient energy to power the country.

So, will the motivation to develop alternative fuels slack off considerably if prices precipitously decline? Yes, it will — and that’s a good thing because as gas prices decline, prices for other products that are dependent on oil will decline, more jobs will be created, and more people will have money in their pockets.

But, what about the long-term? How are we ever going to get off of oil? Well, maybe we won’t. If oil turns out to be the cheapest, most efficient, long-term energy source one hundred years from now, chances are we’ll still be using oil. If, on the other hand, solar powered tofu windmills are the cheapest, most efficient, long-term energy source one hundred years from now, that’s what we’ll be using.

So, if the greenies want alternative fuels to be heavily used, the answer isn’t to try to force it on people via legislation or by artificially creating higher prices, it’s to make a better product that people will voluntarily choose to use.

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