Dilbert Learns Oil Econ 101

Great cartoon. I thought about oil econ 101 when I saw it.

But if there were cheaper alternatives to personal transportation that didn't use oil, then that would spread to developing countries too. We would still buy oil from the cheapest sources, but the world would buy less oil.

This is why calls to research make sense.

The cartoon only explains why it is bad to subsidize the purchases of more expensive half-solutions.

Conservation and substitution in the developed world would reduce demand and result in a lower price of oil overall. That would reduce the amount of money going to countries who citizens and bureaucrats might illicitly funnel money to terrorists.

Check out Scott Adams' somewhat related blog posting.

As long as the supply of oil is upward sloping, conservation will reduce the amount of oil consumed. Conservation shifts the demand curve for oil leftward, reducing the equilibrium quantity - not as much as the the amount "conserved", but some nevertheless.