Energy Policy Redux

Watching all of the idiot pundits/politicians on TV talk about gas prices and energy has been so frustrating lately.  It really decreases my faith in the world.

Oil/gas prices
Facts: Oil prices have been going up a lot lately.  Also, gas prices have been going up a lot lately
What the pundits have to say:
Obama-"end tax breaks for oil and gas"...here's the deal-these tax breaks are most likely in the form of exploration what will likely happen in an efficient market is that there will just be less money for share repurchases.  I personally think share repurchases are a huge waste of money but I'm just some kid...
Gingrich-"2.50 gas"...this is impossible
Palin/other right-wing idiots-"drill, baby, drill"...the problem is not lack of drilling...we are drilling a shit ton.  The problem is that when we are drilling, its natural gas and not oil.  Let's face it, the U.S. is a natural gas rich country.  The U.S. was an oil rich country and then we used it all.  Surprise!!!

The main issue is not a drilling or a production problem...it's a use problem.  I know there are so many supply side economists who get really anal about production and making it easier to supply things...blah blah blah.  But the current energy issue is a demand problem.  There is not enough demand for natural gas.  Couple this with our drill baby drill philosophy and we get natural gas prices going from $14 to $2.50 in the past decade.  How many commercials are about producing natural gas in this country...well a lot cause I've been watching a lot of CNN?  Yet, Chesapeke Energy and ConocoPhillips have scaled back production on natural gas because of weak demand.

So as a natural gas rich country, you would think we would use a lot of it right?  The answer is no...natural gas is actually one of leading exports to Japan.  Instead, we use oil for our cars and most of our heating and cooling and we use coal for our power.  So efficient.....(sarcasm). 

So you might ask...why isn't the economy adjusting.  Well, the coal companies are very powerful and are from electorally valuable states (Ohio and Pennsylvania).  They can get their way to block the creative destruction an economy needs to grow.  It's simple Marxist theory, but this time coal is the factory worker and natural gas is the automation designed to make the worker lose his job and make things better for society.

I'm not a super genius in terms of markets, but as a below-average genius, I can tell you that with demand, supply will find a way.  In our relatively free economy, producers will find a way if they can make money doing it.  Let's get our concern onto demand and stop going anal over supply.

Here's an important/unimportant history lesson:  We used to get our electricity through oil and natural gas, not coal before the 1970s.  There were a lot of supply problems that made us convert to coal.