Legal Commentary

Why committing now to begin drilling ASAP will indeed affect the oil price now

By Beldar

I wrote last week, without bothering to do any online research or include any links, about why under basic economic principles, what we do now (or choose not to do now) affects present expectations about the future supply of oil, and why those expectations do indeed affect the current price of oil.

Now Martin Feldstein ? a Harvard economics professor who was chairman of the Council of Economic Advisers under President Reagan ? has an essay in the Wall Street Journal making exactly the same points in commendably simple language.

This really is basic economics. It's intuitive. It's entirely within the potential grasp of the average voter who's even moderately interested in testing the validity of the Dems' insistence that "we can't drill our way out of this."

How much of an impact on today's prices we can have by changing the market's expectations about supply and demand in the future ? well, that is in large part a question of how definitive and credible the changes are that we make today. Half-measures aren't going to make very significant changes in those expectations. But bold ones will.

Full post as published by BeldarBlog on July 02, 2008 (boomark / email).