August 23, 2005
Hooray for High Oil Prices!
Man, I thought I was a contrarian. Larry Kudlow takes the prize!
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.
I don't know how many of you watch his show on CNBC, but he has been doing this great riff: after an analyst attributes Wal*Mart's bad numbers to high gasoline prices, Kudlow says "Are gas prices cheaper for Target shoppers? Their numbers are up. So are Lowe's and Home Depot."
Prices are how information gets conveyed and ultimately how capital gets allocated. Prices are telling that it's time to invest in production.
On a side note: I am a big fan of Tennessee Congressman Ford, but he showed a tin ear last week on "Kudlow & Company," saying "It cost me $51 to fill my Tahoe. My salary is set by law at $158,000. These prices are real and that will make it hard for me to fill up every week.
I asked my wife to hand me a tissue...