Why are gas prices so high? The quick and dirty answer is that a potential Iranian conflict is ratcheting up prices, as speculators and suppliers prepare for possible interruptions to Hormuz shipping lanes. That's one reason, but we can't blame Iran for the cost of crude more than doubling from its recessionary lows. I explored other possibilities last year, pointing to the increasing difficulty of getting oil out of the ground, and the inability of new discoveries to meet rising demand.
But neither answer on its own really tells you why prices are so high, nor can they explain why we're unlikely to see any long-term declines. Oil lubricates the wheels of prosperity. The link between oil consumption and economic growth is so clear that it's likely to be a defining economic factor in the coming decades. Since the evidence weighs against the world's long-term ability to match demand with new supplies, the global path to prosperity may not be as clear as once believed... read more.
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