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Cheap Seats 2021I’d Like to Have an Argument - 03/02 
By Rich Trzupek
It’s pretty clear that liberals don’t understand the concept of demand. They get subsidies, pay-offs, endless and mostly pointless rules – except for voting, of course, shouldn’t be any actual requirements to do that – tax breaks and a host of other things that they can control. They can’t control demand.
Julian Simon’s famous bet with Paul Erlich is a case in point. If you don’t know about it, a brief recap is in order. Simon was an economist who believed in the power of free markets. Erlich is a muddle-headed professor of biology who has the distinction of being wrong about almost every long-term prediction, ever. For example, late in the 20th century Erlich predicted that England would not make it to the 21st. Pretty sure it’s still there.
Anyway, Erlich was and is a doomsday junkie. One of his favorite themes is that there are way too many people in the world and eventually we’ll run out of resources. Simon replied that free markets always find a way. The more valuable the resource and the greater the demand for it, the more the price will drop over time.
Simon let Erlich pick any five raw materials he wanted in late 1980. If the price of the material went up over the next 10 years, Erlich would win $2,000. If the price of the material went down, Simon would win $2,000. The raw materials Erlich chose were copper, chromium, nickel, tin and tungsten. Ten years came and went and the price of each material declined, making Simon the winner of $10,000.
The reason Simon won is because demand rules. Once there is sufficient demand for something, people are going to find a way to make more of it, or – if that’s not possible – to find a substitute.
The richest fellow in American history, John D. Rockefeller amassed his fortune by figuring out how to refine and transport petroleum more cheaply than anyone else. He didn’t establish a virtual monopoly on oil refining and transport by nefarious means, he rather established the monopoly because nobody could meet demand better than Standard Oil.
Another example? Semiconductors. The earliest semiconductors were used in transistors, a leap forward in electronics of massive proportions. There early semi-conductors were made of germanium, a relatively rare element. As transistors took off, it became clear that something more practical was needed. Scientists figured out a way to purify silica (aka sand) sufficiently for use as a semi-conductor. Problem solved.
Now, let’s think about this demand concept in terms of energy. When President Mean Tweet was in office, America was a net energy exporter for the first time since the Truman administration. Oil was around $40 a barrel and natural gas was dirt cheap. We had done what then candidate Barack Obama declared we couldn’t do in 2008: We drilled our way to $2 per gallon gas.
A side benefit of this new-found energy independence was that it really hurt Putin. Vlad depends heavily on petrochemical revenue. Orange man’s energy policies and his complete refusal to give into the environmental nut jobs kept prices low and that kept the Kremlin scrambling for rubles.
Along comes President Dementia who reinstates bans of drilling in federal lands, shuts down Keystone XL, etc. Oil jumps to $100 per barrel. Gas is approaching $4 per gallon. This brings joy to Vlad’s stony heart. Why is he invading the Ukraine? One, because he can. Two, because he’s got the cash to do so. Biden could have saved everybody a lot of trouble if he just put Putin on retainer.
And the worst part about it is that nothing the Prez does or says is going to do anything to change world demand for petroleum products. If we pump less oil, refine less, produce less gasoline all that means is that somebody else will. Demand will be filled. It’s only a question of by whom and for how much.
Email: richtrzupek@gmail.com
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