My favorite class in college was Dr. Kearl's Econ 110 class. Hands down. Cliche as it may sound, this was the one class that really changed the way I view the world. The first lesson of the class was that economics is not the study of money, but of choices. (Money is just a handy way of evaluating options on a standard scale.) Soon after that came the supply-demand curve, which looks something like this:
This is really a brilliant piece of work. The x- and y-axes represent quantity and price, respectively. The blue line represents supply, and shows that as the price people will pay for something increases, so does the quantity produced. The red lines represent two different levels of demand for a product (oil for example), which gradually decrease as the price increases. The supply and demand curves intersect at the exact price and quantity which maximize benefit for both parties.
Now I chose this particular graph because it exactly demonstrates why gasoline costs so much right now. Demand for oil is increasing, as represented by the demand curve shifting to the right. You'll notice that the point of intersection between supply and demand is at a higher price and quantity. Voila, there are your gas price increases.
With India and China fast becoming industrial giants, the demand for oil has risen dramatically. I read a statistic last week that the number of drivers in China is set to explode over the next decade, something like 8 times as many as they have currently. Oil being a scarce resource, and barring any practical replacement for the combustion engine (and anyone who invents this is going to be richer than Gates, Buffet, and the Waltons put together), the demand for oil is not going to drop anytime soon.
So we have two options for lowering oil prices: decrease demand through "eco-friendly" technologies that use less oil-- shifting the demand curve back to the left, or increase supply of oil or alternate sources of energy such as coal, wind, solar, or NUCLEAR power (we already have the technology; let's use it for heaven's sake!)-- shifting the supply curve to the right and effectively dropping the price of oil.
Coincidentally, the U.S. went through this same deal back in the 70's, when people could only buy gas on certain days based on the last digit of their license plate, and still waited in line for hours. Double-pane windows were invented then. Just a side note.
Both candidates spoke out on their energy policy Thursday. Obama's main thrust is on lowering demand, with increasing supply as a secondary strategy. McCain's plan primarily calls for increased supply. Here are the links. Inform yourself on what is quickly becoming one of the main planks of this year's election:
McCain's Energy Plan
Obama's Energy Plan