Oil Prices Alone Can’t Control Demand

That, at least, has been the guiding theory for U.S. energy policymakers, who since the early 1990s have been more or less content to let markets determine how quickly and in which direction our oil system evolves. When prices get high enough, we’ll change.

Until then, there is no crisis: If we don’t feel compelled to change, then, by definition, the status quo is fundamentally sound. And all the urgent talk about higher fuel economy standards or programs to brew gasoline from farm crops is misguided and unnecessary. For although $60-a-barrel oil may mean the end of cheap energy, it doesn’t mean the end of our current energy paradigm.

There is, however, a less comforting way to look at all this. Even if $60-a-barrel oil isn’t high by inflation-adjusted historical standards, it’s plenty high enough to indicate a dangerously overheated global supply system.

There are three big reasons oil prices have more than doubled since 2000, and none of them offers any reason to have confidence in the market.
Newsday.com