A Bipartisan Fix

Good opinion piece today in the WSJ:

Partisan sides are using a serious crisis to advance political agendas, create political attack sound bites, and launch hearings to "expose" the culprit. Pick your favorite: speculators, Big Oil, environmentalists, China, India, etc.

This is not leadership.

A fundamental misunderstanding of how markets work, and how an effective government can support the private sector, is delaying remedies that will bring down energy prices now. These remedies are to be found in both supply and demand – and both Democrats and Republicans need to demonstrate their command of this fact. Energy is too important a cornerstone of domestic prosperity and international stability to be used as a debating prop.

Your claim that any oil we drill for now will not come on line for five years or longer – and will thus have no effect on prices today – is incorrect. Unlike past oil crises, where the spot price of oil (that is, today's price) rose more than forward prices, the oil price for delivery in 2012 is trading at $138 per barrel. The market is sending a clear price signal that our problem is in the future – because we do not have the will to curb demand or increase supply.

How many houses would someone invest in if there were a future guarantee that the price would not decline? It is anticipation of ever-increasing prices that fuels the mania.

I do disagree with this however:

Efficiency is a huge source of new energy. It is scandalous that we have let the mileage standards decrease over the past 25 years. Whether through mandates or tax policy, active government intervention is needed. Republicans have to stop acting as if the "market" is some pristine state of nature that is not subject to active shaping.

He could not be more wrong here. Consumers are already effecting the market for cars with poor gas mileage. SUV sales are falling fast and small cars are doing quite well. This alone is driving fuel economy standards without any work by the Energy Department. Active government intervention is only needed to free up the markets, particularly drilling. It is NOT allowing the free market to work that is the problem, not a lack of government intervention.