Why high gas prices may be a good thing

A consequence of living in Manhattan is that I rarely think much about oil prices. The main reason for this is I take the city's massive subway system. I pay about $2.00 for a ride leaving and the exact same amount returning.

I have two jobs -- one is in Harlem the other is in the Village/Chelsea area -- making travel easy given that my apartment is about a 20-minute subway ride from both places. Generally a question like "Is the rise of oil a good thing?" would lead many to think that the person posing the question is either smoking something or ignorant of the issue. I would like to state I am neither. However, please try to hear me out because I believe the question is not only a fair one, but may give a different perspective on this issue. In Congress, the Democrats and Republicans have fallen all over each other to blame the other for the rising costs in energy.

Nevertheless, one possibly under appreciated aspect of a free market system economy is the way it handles efficiently, I would say, shortages. As the demand for oil outstrips its overall supply, a natural result is higher prices. This may actually be a positive in that it increases conservation and, secondly, forces our nation to explore oil alternatives. As the cost of gasoline has reached to $4.00 a gallon, the search for alternatives will inevitably increase over time.

In his book, An Empire of Wealth, the American historian John Steele Gordon tells of a similar time in our nations history in the northeast. Apparently, according to Gordon, in 1850, New England had a very similar problem with energy price increases similar to what we see today, but instead of petroleum the problem was whale oil. The entire region of New England had over time built one of the strongest whaling industries in the world.

As a result of their success, they began to kill much of the population of whales on which they had built their economy. The whale oil became so expensive that traders and investors began pouring their money into whale oil alternatives. One success of this was a product called camphene, which comes from turpentine. The product was great as a lubricant but had one major problem -- it had a tendency to explode when heated. Because of this, investors began experimenting with what would later be called kerosene, a derivative of coal.

The New England situation is notable in that there are so many examples within our own history when we Americans have been forced to look in different directions. A helpful push in that direction is currency the fact that some one knows they could become rich. Today major oil companies are making billions of dollars as a result of simple supply and demand economics. Calling these men evil, as some Democrats have done, does not solve the problem. Here's an illustration that may help show the reasons why oil companies are profiting and why we are mad about it, but why we are wrong.

Suppose you were to open the only chocolate candy store in your town. You have a lively and committed customer base and they love the product. Now suppose, unbeknownst to you, a civil war has erupted somewhere near the Congo in Africa and the people who work on the cocoa farms are now drafted into the army or are afraid to work. As a result of this conflict, cocoa prices all over the world rise, making it harder for you to get.

The trader tells you need to pay more for him to send the products to you. You may knot want to do this, but knowing it is the only way to stay in business, you raise the price on your candy bars. But many many of your customers in your peaceful suburban neighborhood may think you're trying to cash in. All they see is that you are making more money than ever before and, because you are the only chocolate store in town you are setting prices.

But you know the price increase is not because you are the scum of the earth seeking to rip people off. In many ways this is the situation we are in now. Sadly, CNN and other news outlets, including Fox, fail to educate the American people on this important issue. The truth is these simple economic principles are not the result of some hidden secret agenda by overseas speculators. but have been with us for quite some time.

I have personally felt that one possible solution to this issue, yet hardly talked about, is an increase in subway systems. The creation of a 24 hour subway system running in every major state would lower energy cost in every major American city. The subways would cut the cost of energy and make people's lives a lot easier, much as it has done for me living in Manhattan.

In this debate for oil independence, we don't need to attack each other but work together to make this nation move again. As a nation that has never strayed away from a challenge, all we need to do as a nation is to sit down, look, and learn from our past. Then we will see our future.

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