In our world there are certain things that remain inviolate; laws of physics and laws of economics. These combined with the law of unintended consequence have created a whole new world.

The most basic law of physics is the Law of Gravity. It doesn’t matter whether we like it or dislike it, agree with it or disagree with it, and no matter how much we wish it could be different, an object will always fall to Earth. So too with the most basic law of economics, the Law of Supply and Demand. When supplies shrink below the level of demand, prices rise. Likewise when demand increases above the level of supply, prices rise. When shrinking supply occurs simultaneously with increased demand, prices rise exponentially.

Welcome to the 21st Century where the environmentalists of America have unnaturally reduced the supply of oil. By shutting down virtually all domestic drilling (offshore and ANWR) and creating a myriad of regulations that has effectively made it impossible to add new oil refineries, they have reduced the world’s supply of oil. To make matters even worse, they refuse to allow alternative energy sources, such as nuclear energy, and have even prevented installation of wind turbines to protect the birds.

While the World’s supply was being systematically reduced, two new world class oil-consuming customers emerged; India and China. Their respective rapidly accelerating appetite has created a demand that would have been difficult to satiate even with normalized supply. In a world with unnaturally restricted supply the problem exacerbates dramatically.

As the economies of India and China expand, their need for a continuing and dependable supply of oil will create within their political psyche the same forces that resulted in US policies in Iran (remember the Shah?), our “liberation” of Kuwait, and our regime change in Iraq. In each of those instances, as the dominant world power, the rest of the world stood back and let us “have our way.” In the immediate future, our position will be replaced with either or both China and India. They will have the same need to maintain a continuing supply of oil, as the US has exercised in the past, and they will possess the military and nuclear capacity to insure their citizens will not be the ones to “freeze in the dark.”

We are locked into a global game of “musical chairs” and the number of chairs have been reduced, and we no longer are the only “big kid” in the game. Since the environmentalists have made it impossible to increase supply, the only solution will be to reduce demand. Eventually one of the prime players will conclude it is easier to reduce an entire country of competitive consumers than it is to reduce internal consumption.

In the meantime the laws of economics will continue to dictate perpetually increasing prices. At some point in the near term future the economic and resulting political turmoil created by this tension will lead to its inexorable conclusion.