<this piece originally written in Nov 2006>
Gas prices going up, supply not going up. If you think the free market can solve every economic problem, how come the supply isn’t going up the way Adam Smith said it would? The OPEC cartel has been able to fix prices for 35 years straight — even through free market theory says it should fall apart.
If free markets worked like in the text books, there would be coal gasification plants all over the place, churning out oil products for cheap (equivalent to $50 a barrel). Small, poor countries would be flooding the market with all the oil they could pump out of the ground. New refining companies would be springing up.
Wise Up! Oil and the energy industry are really big business (6 companies control about 10% of our overall economy), and the barriers to entry for new competitors are just huge. Energy companies have been buying each other up, and there aren’t going to be any new ones.
Even with all that horrible government regulation the US is supposed to have, we have the freest oil industry and the lowest energy prices in the industrialized world. By a long shot. For the US, energy is abundant and “inexpensive” so we waste more of it than just about anyone.
Meanwhile, the rest of the world needs oil too — and there is no spare supply. In fact, world oil production is on the decline, so the only direction for prices is up until somebody makes fusion work. That’s decades away so they’ve really got you over a barrel. So your choices are to increase your income or lower your energy usage.
Find out more…
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API: This organization does the best international economic comparisons
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When Oil Starts to Run Out: Gas at $10 a gallon
