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Gasoline prices and drilling activity

As a public service, I post this chart which shows the average price of regular gasoline in the country, as compiled by the AAA. Gas is getting expensive once again, but I don't think it poses a serious threat to the economy. More likely, high energy prices will act to slow the economy's growth somewhat. Meanwhile, the forces of supply and demand are coming to the rescue, albeit slowly and with a lag. As the next chart (Baker Hughes' total world oil and gas rig count) shows, higher oil prices are having the predictable effect of incentivizing increased oil and gas drilling activity. Higher prices will bring more supplies on line and reduce demand on the margin; that's the way markets work.

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