Increasing Supply; Increasing Demand

It would be hoped that increasing the supply of domestic energy would make us freer of foreign energy sources. Therefore, the administration has promoted:

Relaxing restrictions on domestic energy drilling.



Subsidize energy producers.



Subsidize and support research in alternative energy sources.

All of these ideas would take time to bear fruit and at least the first two are harmful to the environment. More importantly however is the fact that they would be ineffective. The laws of supply and demand make this obvious.

If you increase supply then price declines.

p ~ D/S

But when price declines then demand increases

D ~ 1/p

Therefore, when supply increases then demand increases. We end up using more energy because we have more energy to use.

Moral: We can’t grow our way out of the problem.