There was a debate today in Congress about a law concerning speculation on oil prices. All evidence from the news reports is that the esteemed debate quickly turned into this:
Democrats: The problem's speculation.
Republicans: Well, that might be part of it, but it's really supply and demand.
Democrats: Um, no, it's speculation.
Republicans: Did I say supply and demand? Forget that last part. Just supply. I'm sticking to that. Let's not think about the demand part anymore. That doesn't play well anywhere.
The answer, as I understand it, is of course that it's both. There is rampant speculation in the oil futures markets, a majority of which is not from people in the oil business at all, and there are true supply issues. While I realize that price is very likely not a linear system, if you look at supply and demand charts for petroleum, the demand has not increased at a rate equivalent to the increase in prices. Prices appear to be outstripping simply the supply and demand chain. (Note: Never taken an economics course.) However, simply because speculation is a factor, as Democrats were arguing (and Republicans used to until they've now switched, but that's a different issue), it doesn't mean that supply isn't also a factor. Again if you look at the charts, demand has continued to rise, while supply has not. Increasing supply will certainly, as the Republicans were arguing, also help lower oil prices. The Dems like the speculation part because it's a seeming easy governmental band-aid without addressing deeper issues.
What was infuriating was the false dichotomy that both parties represent. The Dems don't want to drill and so they have to pretend that drilling is completely irrelevant and that a simple speculation law will do the trick. Instead, what they need to be saying is that increasing supply would of course help lower oil prices, but it also has a significant cost, the most obvious of which is the very likely effects on world climate. With a few foot rise in sea level, much of my state's economy would be wrecked (tourism, rebuilding Pearl Harbor, the home of the entire Pacific fleet), and large parts of the island (such as Waikiki) would be under water. Lay out the problems with drilling and let people decide. Don't pretend that more oil won't lower prices (in a decade or so). For the Repubs, they need to be saying that speculation and supply are both issues as well (assuming I haven't heard incorrectly and that they are indeed both real factors), and that they will give the Dems the speculation issue if the Dems give them some increased supply targets -- and why lower prices today is more important than flooding parts of the nation. Or whatever. Ironically, the only way that leasing territories for increased domestic drilling would affect immediate oil prices (because getting billions of barrels from the ground's gonna take a few years) is the influence such a plan would have on... oil futures speculation.
But instead it's all a political game for both parties. Which is why there's no coherent energy policy that addresses supply, demand, the energy markets, and the price of the dollar.