"I'm hooked and I'm beat, powerless!"

The first step in overcoming addiction is for both the addict and his enablers to admit the problem. As long as there is denial, there is addiction, pity parties and the blame game. However, if the addict has the capacity to be honest and a strong leader intervenes with the truth, he can recover.

Regarding our oil addiction, $4 gas has sobered many of us. U.S. oil consumption is finally beginning to weaken and General Motors can't give away SUVs.

But many of us are still in denial. Blaming $4 gas on OPEC, oil companies, price gougers and speculators is evidence, as is the utter nonsense of Sen. John McCain's proposed summer gas-tax holiday and Sen. Barack Obama's proposal to tax excess oil company profits and prohibit expansion of offshore drilling. Exxon's CEO gets so much flak from gasbags that he must feel like a catcher on an Olympic dart team. Since it's someone else's fault, we'll punish them, the price will fall and we can keep on guzzling. Being a victim is a hard habit to break.

Commodity prices —- oil, natural gas, coal, metals, farm products —- have risen because worldwide demand has risen much faster than supply.

On the demand side, the Federal Reserve's monetary policy has been inflationary. The Fed created too many dollars chasing too few goods. As a result, the international value of the dollar has dropped 25 percent in recent years. Since world oil prices are quoted in dollars, this explains 25 percent of the rise in oil.

Mushrooming demand

But oil has risen much more. Why? Unprecedented gains in living standards in formerly poor countries with huge populations have mushroomed the demand for commodities and raised their relative prices. Never has 50 percent of the world's population enjoyed such a massive jump in living standards so quickly (the wonderful side of globalization).

U.S. demand for oil has also been very strong in recent years, and U.S. crude and product inventories are tight —- 6 percent below year-ago levels. Science fiction writers couldn't conjure up a more oil-dependent lifestyle. We love energy-sucking, oversize houses with traffic-clogged commutes made in oversize SUVs. Our American dream has morphed into a nightmare enriching Iran and Venezuela. $4 gas! Look in the mirror!

On the supply side, world output has grown despite technical bottlenecks and political turmoil, but not as fast as demand. But U.S. oil output has declined 45 percent since 1973 due to field depletion and environmental opposition.

Thus the rise in the price of oil is explained by supply/demand fundamentals, not speculation or conspiracy. But many of us remain in denial and need an intervention by strong, honest leaders prescribing potent, sobering medicine.

Wise policy would up incentives to both cut demand and raise production. This would reduce our oil use and cause oil imports, the trade deficit and oil prices to be less and the dollar to be higher than they would otherwise be. Sensible policies have been described on these pages in nearly verbatim columns by Thomas Friedman and Charles Krauthammer.

No pain, no gain

On the demand side, the Federal Reserve needs to follow a noninflationary monetary policy. That may mean higher interest rates and short-term pain for long-term gain in the value of the dollar.

Since oil prices have a volatile history, they might drop in the future and tempt us to fall off the wagon again. Therefore, the government needs to set a $4 inflation-adjusted floor under gas prices by fully taxing any decline in market prices below that level.

The gas tax proceeds would fund cuts in payroll and income taxes, especially for those with lower incomes, and beef up EPA policing of expanded energy production. Other federal regulations and their bureaucracies, such as dumb average-miles-per-gallon standards and ethanol mandates, would be unnecessary.

To encourage supply, we need to allow the energy industry to earn the profits needed to make the huge and risky investments needed to produce more fuel from traditional and renewable sources. We also need to cautiously open more areas to domestic exploration and production, subject to strict EPA surveillance. Oil can probably be produced in the U.S. with much less global environmental impact than it can be produced and shipped from abroad. We can also prudently use more nuclear and offshore wind power. But the net environmental impact of wise policies should be very positive.

Until more of us admit we're hooked on oil, we'll continue to play the blame game, and our pandering politicians (enablers) will reflect our denial and generate nonsensical energy policy.

> Arnie Dill is an economist living in Atlanta.

 PAUL LACHINE / NewsArt