Republicans are worried about how to spin high gas prices, and they should be. Even though there isn't much the government can do to affect prices, the recent energy bill makes it look like they aren't even trying; plus, the public wants results from the party in power, not excuses. So what should the Republicans do? Why not take Larry Kudlow's perspective and point out that high oil prices will lead to technological advances, new production, and conservation.

Permit me to take a contrarian view on the oil price shock. I say three cheers for higher energy prices. Why? Because I believe in markets. When the price of something goes up, demand falls off (call it conservation) and supply increases (call it new production). We're seeing a tectonic shift.

As Dan Yergin has advised us, energy supplies in the next few years will explode. Now the public is even favoring nuclear power. And the government is stepping out of the way by giving FERC the authority to override localities who oppose nuclear power, liquefied natural gas or other forms of energy. ...

So supply will rise exponentially in the years ahead, demand will slow a bit and we'll all live happily ever after. The moral of this story: markets work if you let them.

Environmentalists should be ecstatic, and Republicans should point out that high prices are the best possible incentive for innovation. Long-time readers may remember that I've been making the same argument for years as I've written about the myth of depletion.

(HT: Instapundit, who thinks the Bush Administration agrees with Kudlow.)



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