2000s Energy Crisis - Possible Mitigations

Possible Mitigations

Attempts to mitigate the impacts of oil price increases include:

• Increasing the supply of petroleum
• Finding substitutes for petroleum
• Decreasing the demand for petroleum
• Attempting to reduce the impact of rising prices on petroleum consumers

In mainstream economic theory, a free market rations an increasingly scarce commodity by increasing its price. A higher price should stimulate producers to produce more, and consumers to consume less, while possibly shifting to substitutes. The first three mitigation strategies in the above list are, therefore, in keeping with mainstream economic theory, as government policies can affect the supply and demand for petroleum as well as the availability of substitutes. In contrast, the last type of strategy in the list (attempting to shield consumers from rising prices) would seem to work against classical economic theory, by encouraging consumers to overconsume the scarce quantity, thus making it even scarcer. To avoid creating outright shortages, attempts at price control may require some sort of rationing scheme.