This post from TJIC, which is really about something entirely different, mentions that the price of cocaine has been dropping sharply over the last 10 years. This is something I have heard police officials lament as well.
Does the profit motive rock or what? The largest and most powerful government in the world stations armed men and ships around the country. It has a legal system in place with huge penalties that has of late been nearly entirely dedicated to drug enforcement. The US has even subverted 200 year old Constitutional restrictions on searches and property seizures (the Patriot Act is mostly used for drug, not terrorism, actions). All to stop the importation of certain valuable substances. And even so, the human mind is powerful enough to subvert all of these restrictions and bring in so much supply that the price continues to drop.
Al Gore believes that alternative energy efforts in the US are being subverted by the oil companies:
Apparently, according to Gore, the oil companies drive up prices
reducing supply and then depress them in a telling pattern. As soon as
the political will swells to a light boil, the companies reduce
Really? Independent drug traders are able to subvert a million government officials with guns to keep cocaine prices low, but Exxon, with a 5% market share (at most) in oil, is able to hold the line on oil supply?
Sure. In 1972 and 1978 there were a series of oil price shocks (to real levels about where they are today) that convinced everyone that oil prices would keep going up and up and that oil would run out within a few decades. Of course, in about 1984 oil prices crashed, and stayed down for almost 20 years. Depending on how you date it, it took oil supply development between 6 and 12 years after the price signal to flood the world with oil, and that was in an environment with price controls and windfall profit taxes that reduced development incentives.
Right now, we are about 5 years in to the current oil price spike. Go long at your own risk.
Update: Of course, the Democrats in Congress are doing everything possible to keep oil prices up. If I wanted to ensure high oil prices, I would 1. Kill incentives to increase supply, perhaps with a "windfall" profits tax and 2. Put the most promising potential new exploration areas off-limits to new development. Congressional scorecard: #2 is in place, and both Obama and Hillary and Pelosi are proposing #1.
Update #2: Another thought on Gore's statement: The boom-bust
patterns in oil are characteristic of nearly every other commodity out
there, which therefore presupposes that if oil prices are the result of
manipulation, then every other commodity must be as well since their
prices demonstrate the same patterns. We see these patterns in
commodities that politicians have never even heard of and in which they
have never thought to exercise their "political will." (political will
in this context defined as use of government force against a segment of
A reasonable person might
suppose that the surge in prices followed by a drop a number of years
later is better explained by the time delay in increasing oil
production after oil prices spike. In many ways, Al's theory is simply
delusional. If your friend started trying to tell you, in all
seriousness, that every action Microsoft takes is actually aimed at
thwarting him personally, you would think him insane. But this is
effectively Gore's argument, showing the immensity of the politician's
ego. Oil prices move not because of supply and demand, but because of
us politicians. Every tick up and down is carefully managed to thwart
us brave Congressmen!
When a politician describes price signals as mainly influencing political actions, rather than the actions of free producers and consumers, they are probably a socialist.