30 October 2007

The Market is Working

Don't fret, according to U.S. News and World Report, as oil climbs toward $100/barrel.

"Today's economy is better able to absorb the rise in the relative price of energy, because it is more flexible, it is still relatively strong, and we use energy far more efficiently than we once did so that oil is not as important as it once was. In addition, contrary to popular opinion, oil may be a "tax" initially, for consumers and net oil consuming countries, but eventually oil revenues get spent—recycled—if not in the spending stream, into financial markets."

"High oil prices, as unhappy as they make us, are doing God's work, by curbing our appetite for carbon fuel, pointing us to greater energy security and limiting the impact of human activity on the environment. The decline in gasoline demand in response to rising energy costs is proof that markets work and that market mechanisms are our best energy policy."

Source: U.S. News and World Report, 'Capital Commerce'.