I am surprised that nowhere in this discussion has anyone addressed one of the recurring themes on this blogsite: the decline of the dollar! Yes, speculators can cause short term volatility, some of the spikes and pullbacks. But the long term trend is strictly up (as with all commodities), largely in response to the dollar’s declining purchase power. The best way to halt the climb of inflation in commodities is to reign in our government’s deficit spending and loose monetary policy, not to restrict the activities of speculators. The speculators will stop betting on future price climbs if the government stops debasing the currency and giving them reasons to make that bet!

Of course, the dollar decline isn’t the only factor. Americans bought an awful lot of gas guzzlers in the past few years, Hummers, Navigators, Escalades, and not just SUV’s but big cars with poor mileage too. Surely, many of these vehicles (and the gas for them) were purchased with the “equity ATM” during the bubble. Want oil to be cheaper? Stop using it! If in aggregate we, the human race, raised our fuel efficiency and made a serious push towards replacing oil with alternative energies, we could keep oil affordable in the time before it ultimately runs out.

As an aside, I think more drilling is like the “moral hazard” in banking. In lending we need better lending standards, not a bail out for recklessness. For energy we need better solutions than something that is dirty, affects the climate, causes political tensions and bloodshed, and will ultimately be used up. We don’t need to facilitate future dependence on either easy credit or oil.