I'm not usually an optimist about things these days in the business world but I actually have some optimism about the surge in oil and gas prices.
First I'm not convinced at this point that current pricing is a true reflection of supply and demand. I think some panic buying, or maybe speculative buying, has pushed the price up to the current level. If I'm right about that then at some point that price bubble will burst and cause the price to drop. How much and when I haven't a clue.
But if you're a believer in a free market, and I am, then we're seeing real pricing of oil and gasoline. And I think that real pricing is going to drive consumer spending changes--mainly in the amount and way we drive and with what type vehicles. In other words a cultural change will occur and that change will drive down American demand for oil. I haven't a clue about other country's situations but I believe this will definitely occur in the U.S. and probably is already occurring to some degree.
Further I believe that will change us long term to a more frugal oil-driven economy like what has already occurred in Europe. The Professor had some first-hand experience with that just yesterday. There's going to be a lot of short term pain but I think that's going to help us in the long run. Economics has some similarities to Newton's Law in that respect. I just wouldn't say it is an equal reaction but it's certainly an opposite one.
Then if American business and government can get together with incentives on solar, wind, and nuclear power on top of the cultural shift in our driving then we can really make some headway toward becoming less dependent on foreign energy. I'm rarely in agreement with billionaires like T. Boone Pickens but I'm mostly in agreement with him on this issue. His critics say he's too ambitious and just greedy. I can't make an argument against the latter. He's clearly in it to make money but as for as his being too ambitious they said that about American's landing on the moon in the sixties. We did it and we can do that or anything else we set our mind too.
The key is the federal government. Our leaders in Congress and the oval office have to set the goals and remove obstacles, particularly regulatory and financial ones. If I have any pessimism about any of this it would be in that area. I'm worried we don't have any leadership in that respect. But for now, I'm still optimistic. It's time for them to step forward...
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