California highest gas prices

THE free market is often a better regulator than the government, as our current energy crisis is making all too clear.

The soaring prices of oil and electricity have jolted Americans, who had become somewhat complacent during these many years of prosperity. While government can step in to cap the price of electricity and release strategic oil reserves, market forces (in the form of soaring prices) may prove even more powerful.

There are signs that market forces are already beginning to motivate change. Businesses that make power-saving equipment and appliances are booming -the same businesses that a few years ago were languishing. That's because replacing existing systems with these tools is expensive, and until now the savings from lower power bills didn't make up for those costs. As the price of power rises, it makes financial sense to invest in power-saving technology. Hence, the free market is prompting long-overdue investments that no amount of government cajoling could produce.

Obviously, these moves toward renewed energy conservation are only starting to appear. And many sectors of the economy are not participating.

Despite gasoline prices climbing to nearly $2 a gallon, Angelenos remain steadfastly committed to their sport utility vehicles, despite an excellent road system and good weather that make four-wheel-drive vehicles unnecessary.

Though energy-saving appliances and other technologies exist, few homes and businesses have bothered to install them because until recently power was cheap and plentiful.

It's an election year, so perhaps politicians can be forgiven for pointing the finger of blame at everyone except the voters, who really deserve it. One favorite demon is OPEC, which has been accused of fueling high oil prices by restricting supply. OPEC did, in fact, reduce supply in 1998 and 1999, but it has been steadily raising output this year. Total OPEC output in August hit 28.8 million barrels, the highest since early 1998, and the organization expects to produce 29.2 barrels in October, which would be a 30-year high.

Of course, much of the rise in demand for energy can be attributed to our strong economy, and the role that technology is playing in it. Computers drain a good deal of power, as do all the new factories and other businesses created during the flush times. Even if people weren't wasting power, demand would likely be higher than it was in years past. Yet given that there is a limited supply of energy, and to close down all these new businesses would be to shoot ourselves in the foot, the way to alleviate the power crunch is to step up the pace of developing and implementing energy-saving technologies.

Carmakers complain that there simply isn't enough demand to justify the expense of producing large numbers of electric and hybrid vehicles. It's unclear how high the price of oil has to rise before that changes - certainly, there's little sign of slackening demand for gas-guzzling SUVs so far - but eventually, that threshold could be reached.

Higher gas prices might even help the state achieve its zero-emissions mandate, which requires that automakers must offer about 22,000 smog-free (electric-powered) cars for sale in California by the 2003 model year.

Such government mandates, while sometimes effective, are hardly a cure-all for energy management. Market forces will go a long way toward solving a number of problems that have completely vexed government regulators. And ultimately, some combination of reasonable government mandates and market forces could reduce our economy's dependence on oil and help clean L.A.'s polluted air -- without derailing our economic expansion.