by Mark Luedtke

Created on: August 09, 2008

On July 1, the International Energy Agency reported that speculation had not distorted the price of oil in the short term. I hope they like eating crow. Over the weekend, the price of oil dropped nearly $20 from the record high price set July 11. Gas prices follow oil prices. The only thing that changed is the pressure on Congress to drill.

Just talking about drilling drove down oil prices by $20 a barrel.

Of course drilling for oil will drive down oil prices. Speculators aren't fools. They make their living examining the long-term prospects of markets, analyzing future supply and demand, and investing in the commodities that will rise in price. And it doesn't take a brain surgeon to recognize that the demand for oil is rapidly outstripping supply. Drilling for more oil will accelerate growth in supply, putting downward pressure on the price of oil futures, and that in turn will drive down the price of oil. Talking about drilling causes the price to fall. Removing the ban on drilling will cause oil prices to fall further. Beginning drilling will cause the price to fall further. Producing oil will cause the price to fall even further.

Free people are free to speculate. Speculators perform 2 important roles in our markets. They insulate suppliers and consumers from abrupt changes in price that would otherwise result from abrupt changes in supply and demand. They also serve as canaries in a coal mine. For decades, experts have been telling us that demand for oil would one day outstrip supply, but Congress continued its Imperial ways regardless. It wasn't until speculators drove up the price that our representatives were forced to acknowledge they're supposed to work for us, not vice-versa. Because of that, government aristocrats want to remove the canaries.

Democrats say it will take 7 to 10 years to extract oil from new drilling. I doubt that's accurate, but so what? We'll want affordable oil in 7 to 10 years too. We'll want prices to drop along the way. If we had started drilling 7 to 10 years ago, we wouldn't have this crisis today.

And who is Congress to ban drilling for oil anyway? This used to be a free country, where free people could identify opportunities and develop them in their pursuit of happiness. Thomas Jefferson championed the idea that a man owned not only the surface of his own land, but what was underneath it mineral rights. The United States led the world in mineral and oil production because of that revolutionary innovation.

Now a medieval aristocracy

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