Most policy debates seem to be a war of competing theories: Will lower tax rates really stimulate greater economic activity? Do generous government welfare programs actually discourage people from seeking employment? Each side marshals data supporting its side and voters have to sort out whose case seems most compelling.
Often it’s hard to connect those policies with the decisions that you make in your own life. After all, we take into account numerous factors when we make big decisions, like how much to work or whether to try to open a business. Corporations, too, consider the particulars of their industry, specialty, and business environment when deciding how many jobs to offer or where to locate. It’s hard to isolate the affect that one policy, or even set of policies, has.
Yet Americans increasingly seem to be connecting the dots between national energy policy and its impact on their lives. As everyone knows too well, gas prices have soared by 35 percent in the past year. The rising cost of energy and transportation has rippled through the economy, driving up prices across all economic sectors. Families are finding their paychecks gobbled up by necessities, like gas, food, and home energy bills, and worry about where this disturbing trend might lead.
Undoubtedly, a variety of factors contribute to rising energy costs, but voters increasingly seem to understand that the central problem is one of supply and demand. In testimony before Congress this week, the Federal Reserve Chairman, Ben Bernake, explained it like this: “There are multiple causes, no doubt, for energy price increases. The most important cause is the global supply-and-demand balance. The fact that … oil production has not kept up with the growth and demand for oil, particularly in emerging market countries which are growing quickly and industrializing.”
That’s as simple as it gets. Demand has gone up. Supply hasn’t, so prices have gone up. The clear solution is to find ways to increase energy supply. Conservation, reducing our demand for energy, would also help, of course, but most Americans know the limits to their ability to reduce energy use. High costs have discouraged many from taking a summer road trip, but hasn’t changed the need to get to and from work each day.
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