25 years of teaching economics and 40 years of adult life have taught me that markets work. The forces of supply and demand are as regular and forceful as tides at the beach. When consumers decide that they want more of an item, the price of the item will rise and then suppliers increase production. When inputs become more difficult or costly to obtain, price of items produced by them will rise and then consumers will find ways to reduce consumption. When politicians try to restrain the laws of supply and demand, producers and consumers will try to find ways to change the "effective" price without violating the law and shortages or surpluses tend to result.
Experience has also taught me that many people, perhaps even most people, are suspicious of markets and do not understand how they work. For example, an increase in the price of gasoline will bring forth cries for greater reliance on renewable energy. Some argue that the government needs to step in and increase taxes on "bad" energy while subsidizing "good" energy. They fail to realize that if the market is left alone many of the desired results they seek will occur automatically in markets without without any government interference. As oil and gasoline prices rise, consumers will look for ways to substitute this "bad" energy with alternatives. Hybrid cars and ethanol are two possible substitutes. When these substitutes become cost-efficient to the consumer, the consumer will use them. Therefore, an increase in oil and gasoline prices will bring about exactly what concerned politicians say must occur: consumer of oil and gasoline will decrease and the production of hybrid cars and ethanol will increase.
This perspective leads me to ask why the government needs to do anything to "correct" the energy market. Suppose that many consumers find that oil and gasoline, even at historically high prices, are more cost-effective than substitutes for many uses. I ask who, in this case, is helped if we induce these consumers to switch to alternative by artificially deflating the price of alternatives or artificially inflating the price of oil and gasoline. I recognize that arguments can be made. They are more complex, however, than saying that we need to reduce our dependence on fossil-based fuels.
