How to lower the price of oil

Here's an interesting piece by Harvard's Martin Feldstein, who was Council of Economic Advisers head during the Reagan administration and is a pretty good economist. He argues that because the expected future price of oil causes those with supplies to keep it in the ground rather than sell it -- because they expect the price to be even higher in the future -- anything done now to reduce the expected future price of oil will have an immediate impact on the current price of oil. He notes that steps to reduce demand -- higher CAFE standards, for example --would help, as would steps expected to increase supply, even if the expected new supply wouldn't actually come online for a while. Thus, I infer (he doesn't say it directly) that just announcing that we're going to start drilling offshore or in ANWR should have a downward impact on the price of oil now.

I find the argument quite persuasive. The same argument applies to food. Announcing that the ethanol program would be ended or suspended for a few years should place immediate downward pressure on the price of corn. It might well end up higher than a year or so ago -- increased demand due to increased affluence in China, India and the Gulf states would still be a factor, as would the drought in Australia that to my knowledge hasn't ended yet -- but it still should go down noticeably. The greatest impact would be on those on the edge of dire poverty in underdeveloped countries.

Midwest floods another reason to dump ethanol

Note that in the Register's editorial on the Midwest floods, usually empathetic boilerplate in the case of most disasters, we took the occasion to call yet again for an end to the ethanol program. It jhust makes sense to me; crops are going to be down, so using any of them for ethanol in the middle of a world food crisis that the U.S. is likely toi feel in even higher food prices, would be incredibly perverse. But I don't think many other newspapers caught the connection.