Professor Martin Feldstein of Harvard in today's WSJ:
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Any policy that causes the expected future oil price to fall can cause the current price to fall, or to rise less than it would otherwise do. In other words, it is possible to bring down today's price of oil with policies that will have their physical impact on oil demand or supply only in the future.
For example, increases in government subsidies to develop technology that will make future cars more efficient, or tighter standards that gradually improve the gas mileage of the stock of cars, would lower the future demand for oil and therefore the price of oil today. (See John McCain's $300M battery prize, and support for conservation).
Similarly, increasing the expected future supply of oil would also reduce today's price. (See John McCain's support for increased development of US oil resources). That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories.
Any steps that can be taken now to increase the future supply of oil, or reduce the future demand for oil in the U.S. or elsewhere, can therefore lead both to lower prices and increased consumption today.
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So it appears that John McCain's team paid attention in economics classes, while Barack Obama's team (including Nancy Pelosi and Harry Ried) just take their talking points from the anti-capitalist environmental lobby and "Oil Conspiracy Theorists"...
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Prof. Feldstein's piece does an admirable job of explaining a very complex subject in relatively few words. Despite the professor's teaching prowess, the subject matter is still complex enough that most Americans would never read this article, let alone understand it. The challenge is finding a way to explain these principles to the masses. If you could get people to understand the economics behind our current situation the disparity between McCain's pragmatic real-world policies and Obama's lofty yet hollow rhetoric becomes obvious. Can we find a way to get the average American to grasp the economics?
A nice start would be for authorities on the subject like Prof. Feldstein to be more open and use examples (like the ones you used in your blog) to make the case to WSJ readers and others like them who have the power to start moving the debate from the top down. I understand that he is trying to maintain his academic integrity but at the end of the day it doesn't do much to highlight McCain's solutions or Obama's lack of real solutions if his conclusions aren't more explicitly tied to the candidate's respective positions.
We listen to "journalists" editorialize our news everyday and it would be nice to hear what the preeminent thinkers of our time have to say about our candidates for a change.
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