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Letter: Supply of energy should be increased

Letters to the editor-2021

As an amateur economist, I am concerned about our current path to resolving higher prices and inflation. The Fed is raising interest rates to try to get higher prices and inflation under control. We need some common sense thinking here.

In Economics 101 we learned about pricing and the Law of Supply and Demand. In simple terms the price of a product is the “equilibrium point” where supply meets demand. (Go to Wikipedia to get a technical explanation of the Law of Supply and Demand.) If things change here are the results:

If demand for the product goes up, the price of the product goes up.

If demand for the product goes down, the price of the product goes down.

If supply of the product goes up, the price of the product goes down.

If supply of the product goes down, the price of the product goes up.

The Fed is raising interest rates in an effort to cool demand for goods and services. We have a good economy with relatively full employment. And the Fed wants to cool this down? Really? Possibly pushing us into recession. The rising interest rates are driving the stock market down, and consequently destroying many folks’ financial dreams and security.

The government is working on the demand side of the issue (or equation), when it should be working on the supply side.

This is not rocket science, just common sense. So, why have the prices been going up during the past year or so? On a global basis with 8 billion mouths to feed, I would think food is the largest commodity. It is hard to change supply or demand for food products. So the next largest commodity would be energy – gas, oil, coal, hydro, nuclear, solar, whatever. And now the government has taken a federal position to eliminate fossil fuels as soon as possible. The administration has limited the economic transportation of oil from Alaska. Add the Russian war in Ukraine limiting more energy supplies.

Limiting the supply of energy causes prices to rise. Increasing the supply of energy causes prices to go down. And energy cost effects the price of everything.

I appreciate the need to address climate change and the sources of energy. Changing that is a long term challenge, maybe 10 or 20 years. (Do you know that China mines five time as much coal as the United States? With 1.5 billion people, their energy requirements are astronomical.) Put politics aside and start working on increasing the supply of energy and other goods and services.

Charles C. McConnell

Aiken