Posted by
Andrews on Tuesday, November 25, 2008 6:12:43 PM
Has anyone else noticed that gasoline is now down under $2 per gallon and has been for some time?
I only ask as we were told less than a year ago that the end was nigh, that we had reached "peak oil" and we would face nothing in our foreseeable future except $10 a gallon gasoline and ever declining standards of living. That we had no choice but to go green and learn to make do with less.
And yet, thanks to a government which wisely did nothing, except removing some senseless restrictions on offshore drilling, we have seen the market function exactly as it is supposed to. A temporary shortage, caused by a demand exceeding supply, caused money to go into increasing supply, at the same time substitutes were found where possible, such as using coal for power generation or alcohol for plastics manufacture, and, as expected, prices once again fell.
Sadly, it is a lesson I doubt many will take to heart. In fact I know we won't.
When the "oil crisis" first started, we heard time and again how the "market failed". Similarly, when the subprime crisis started, we heard again and again that the market "failed". But that is just wrong. In the case of gasoline, the market worked exactly a sit should, it raised prices when demand increased, which eventually caused prices to drop. The only failure was our inability to access some reserves due to government meddling, that is hardly the failure of the market. Similarly,the subprime crisis has nothing to do with the market, the entire problem was created by the government interfering in the mortgage market. The free market did not fail, there was nothing approaching a free market in mortgage lending.
So, though the market has basically resolved our oil problems without any government interference, I somehow doubt we will hear the end of calls for government interference to "fix: the shortcomings" of the free market.