Many people are inclined to ask, "What happened on Friday?" That’s not the right question though. Something has been happening over a much longer period of time. It’s only now that anyone is taking notice. The chickens are coming home to roost if you will.

The situation is this. We have fast rising fuel prices, not only for oil but natural gas too. Almost everything we do requires fuel. Fuel allows people to use technology to create energy. Energy powers our homes, businesses our lifestyles. The need for energy is ubiquitous, hence the need for fuel is ubiquitous. The vast majority of the energy in the United States is generated via fossil fuels.

The U.S. isn’t the only consumer of fuel in the world. The U.K. and Europe also demand vast quantities of fossil fuels, albeit much less than the U.S. There was a time when the market was driven by demand in the U.S., U.K. and Europe. That time has past. Demand is also driven by India, China and other developing nations as well. The irony of the situation is the fact that prosperity in the U.S. and other places is the direct cause of the demand coming from India and China. Don’t blame India and China though. They’re building their economies just like the U.S. has done for decades. And we in the U.S. are driving that growth.

The situation is simple and complex at the same time. Higher fuel costs increase the cost of energy. Since energy is required to do almost everything this means that every aspect of the economy is affected by rising fuel costs. Of late the market has seen flat supply of the most necessary fuels while demand has increased. So if supply of fuel is increased along with a reduction in demand then we are likely to see lower prices for fuel and energy. Those lower prices will help to stabilize the economy in the U.S. That’s the simple part.

The hard part is figuring out what the most important problem is and how to solve it. There is a supply problem. Not enough oil is being pumped to give the market a good feeling that the value will go down. There is a demand problem. If supply increases but demand does not decrease then there may not be a drop in prices. There is a technology problem. The technology required to greatly reduce demand for fossil fuels is moving along slowly. There’s no doubt that for all the funding they’ve received of late that clean energy technologies still cannot compete with fossil fuels in terms of the ability to meet our energy requirements. These problems and others constitute the complex part of the scenario.

Countries really need strong leaders to assist in solving these sorts of complex problems. The problems related to fossil fuels are no different. The situation is dire. The rapid rise in fuel costs is starting to ripple through the U.S. economy with companies like Ford, General Motors, American Airlines, Continental Airlines (heck all the airlines) crying uncle. Gas prices are sharply higher. Food costs are sharply higher of late. This rapid rise in fuel costs is a very real problem that affects everyone. So how do we get costs under control?

Our leaders (and that means Mr. President and elected representatives) need to step up and get cracking on a pragmatic energy policy. The policy should include aggressive measures to diversify the mix of fuels we use. That means more wind, solar and biomass. It also means more nuclear power (that’s right nuclear) and electric transmission to go along with it. It also means cars that use much less gasoline than they do today.

A new energy policy should also devote assets to increasing the U.S. supply of fossil fuel. New sources of natural gas and oil are desperately needed. Without these we have no way to counter the reduced output and growing demand around the world. Drilling is unpopular but very necessary if we want to build energy security for the U.S. and the world markets.

Education should be a very key component of a new energy policy as well. All the public sees now is sound byte rhetoric from legislators looking to make headlines. Where are the leaders getting on television, explaining the situation and telling people what they can do to help? They don’t exist today. The President of the United States could do this and I have no idea why he hasn’t. Are these issues not of utmost national importance?

The situation we are in today has taken decades to create. So there’s no reason to believe that it won’t take that long to reverse. If we get started today, the United States can continue to reduce our demand for fossil fuels. We can also continue to increase our fossil fuel supplies in order to stabilize the market. We can also become the leaders who will reap great benefits from implementing the latest clean energy technologies. Finally, every American (especially those who live very large) can pitch in today by getting smarter about energy and changing their ways accordingly.

Are our leaders in Washington ready to lead the way? For the sake of the nation and the world, I sure hope so.

* The price of oil is affected by more than just demand for energy. We can’t control geopolitical issues and things like assassinations in Pakistan and the Iraq war will keep traders on edge.
* Demand is still a big factor and demand will continue to increase.
* Clean technologies are being developed but it is going to take time to bring things like mass solar and electric only vehicles to critical mass.

These are just a few reasons why I think that the price of crude oil will rise before it falls. I do think that the price will fall in the long run because the three situations I mentioned above can and will turn around.

In the short run we will see higher gas prices that will follow along with the increased oil prices and this is where the real difference will be made. If people see the cost of energy every day of the week it will continue to be on their minds. And when it is on people’s minds it becomes an important issue. This makes people change their consumption habits. And it makes people put pressure on their legislators to change things.

I’ll keep watching the industry news daily and report here to let you know how the tone changes.

I have heard economists state that they think the price of oil will retreat into the $60 to $70 dollar range by the middle of next year. I’m not so sure of that. What I am sure of is the fact that the performance of the U.S. economy is very much tied to our energy consumption habits. And as people in the U.S. continue to rely on sources of energy that need to be imported we become more and more vulnerable to forces that we can’t control. Be sure that those forces, in places like Russia or the Middle East will control that vulnerability.

Is it any wonder that while the price of oil is near historic highs that the value of the U.S. dollar is at historic lows? I don’t think so. Action needs to be taken soon.

The U.S. as a country is in a big mess. We’ve been in messes before and there is a way out. Our country desperately needs to leverage our technological know how to unlock the power of clean energy. Clean sources of energy pose great problems in terms of supply volume and reliability. But this is a country of problem solvers. And if we can put time, money and brain power into solving these problems then this whole situation could be turned around in just a few short years from now.

Investment in clean energy technologies will reduce dependence on foreign oil. This in turn will be a contributing factor in driving down prices and eliminating the leverage that Middle Eastern countries have on our policies. The increased investment will create many jobs at home and usher in a new era of technology exports. Both of these situations will greatly stimulate our economy. Our skies and waterways will be cleaner too. Investment in clean technologies means a huge win for our country in a lot of ways.

I think that there are a lot of complex reasons why we haven’t moved further ahead in developing and deploying answers to the problems of unlocking the power of clean energy. For sure we have made progress. But this thing needs to get kicked into a different gear.

If the current situation does not kick investment and innovation into gear than nothing will. I’m willing to be that things will kick into gear soon enough. The U.S. and the rest of the world will be in a much better position because of it.