So gasoline has hit $4.00 per gallon and seems poised to go even higher. Well, la-de-da.

And why do we say that? The law of supply and demand says the current price bump is from the well-known effect of supply and demand. Pardon the tautology for a moment because in this case, much of the demand comes from future-trading speculators who are pushing the price up in hopes that the price will keep going up, a self-fulfilling prophesy.

Futures trading is like signing on for home heating fuel at a price set for the season. If the price goes up, you win. If the price falls, you’ll pay higher than market price for your heating oil. A futures trader promises to pay $X/bbl for the delivery of $Y/bbl in the futures. The more traders who think the price is going up will buy now, that that demand is what is pushing up prices.

It’s an effect that will continue as long as the prices don’t fall. Pardon the tautology, but when prices do start to fall, the speculators will get burned and oil—and the price of everything depends on it—will fall as well. That’s gasoline prices, the prices of plastics made from petroleum, product transported by petroleum fuels.

Can prices really fall? There are people who thought that real estate prices could never come down. Surprise.

We’re trying to economize our way out of the mess we’re in, but what economists call elasticity of demand for petroleum is small. Sure, sales of SUV’s have plummeted, but new cars are a tiny segment of the overall vehicle fleet, which is anything but a majority of petroleum consumed. Repeating the above, there are also plastics, plus heating oil, lubricating oil, etc., etc.

Transit ridership is up significantly as well, but again, transit serves only a very small percentage of (predominantly) commuters. And for the most part, they have to drive to the parking lots at train or bus stations. Most commuting is not periphery-to-city-center. It’s from suburb to suburb, and the only way to cut that is for workers to relocate. If you think the vehicle fleet demand for petroleum is inflexible, residence-based demand for transportation is a slab of granite.

And for home heating, there are only so many sweaters Jimmy Carter can wear.

Indeed, the quickest way to affect supply and demand is via supply. Let’s drill in ANWAR, let’s drill off-shore, let’s drill in Montana where there’s enough new-found newly-accessible oil to make a sheik turn as white as his sheet.

True, it will take a few years for the supply to come on-line. However, just the promise of more oil will cause futures traders to have second thoughts about buying with the belief that prices will continue to spiral. And when that happens, the future traders will run away from high prices like a two-year old from a big hairy spider.

What’s more, when prices start to fall, the Saudi family will get less return from the oil they sell…and to maintain their bizarre standard of living, they’ll have to pump more oil, and to do so will further depress the world price for oil.

The Saudis, furthermore, sit on top of a known quantity of oil (unless you subscribe to the theory that oil is not compressed dinosaurs but organic molecules escaping through the faults in the earth’s crust where most petroleum deposits are) that’s easy to extract. Other oil elsewhere still awaits discovery, awaits technology, and awaits the depletion of Saudi oil.

Drilling, even the announcement of an intention to drill, will lower prices. Building new refineries—did I mention that Montanans want refineries, and will get them unless some guy who goes to work in a robe and sits on a bench contravenes the will of the majority—will do the same.

There’s nothing holy about high oil prices. Keeping prices low is good for the economy, and what’s good for the economy is good for ordinary folk like you and me. Drill today, even promise to drill and keep the promise, for lower fuel and petroleum based products. You’ll be glad you did.