Something's that going to change the supply and demand five years, ten years, twenty years from now will have an impact on today's prices. The reason for that is that if an increase in long-term supply or reduction in long-term demand is perceived by investors and by the oil industry and others as changing the future price of oil, that changes their incentives today in terms of the inventories they accumulate and the prices they charge. If the price is going to be lower in the future because of more supply and less demand that price is going to come down in the future, that gives producers and others an incentive to sell more today rather than hoarding it, inventorying it, or failing to bring it out of the ground. An that's an incentive that affects not just American firms but also the Middle East oil providers who look ahead and see policies coming into place which are going to affect the demand and supply over the long term, and we've already seen it in recent day as the price of oil has come down substantially."I think the key thing to understand, and to communicate to readers, is that policies that aim at the long term will have this favorable short term affect on prices."
While Obama suggests that, yes, we need new technologies, but Americans should air up their ties and get tune ups to improve gas mileage by an unsubstantiated amount. These folks do a good job debunking Obama's math (an accountant once told me that, if you throw enough BS numbers around, people don't bother to check them; was that what Obama's folks were hoping). One thing I think that Obama and the debunkers miss is that, if the average American is now paying two to three more times for gasoline than last year, how exactly are they going to afford new tires and a complete tune up while still trying to get to work and feed their kids.
The truth is, America can't wait for the new technologies to come on line in a decade. They need solutions now. In a free market, those solutions mean figuring out how to impact the supply and demand that are the primary calculus for determining prices of any product.
Obama's plan sounds like, well, Jimmy Carter's plan: turn down/up the thermostat, ride the bus and hope for the best.
