There are several reasons we have an energy problem now.

-- The primary reason is that large parts of the world are working their way rapidly up to a living standard we've enjoyed for many years. It is natural that the price of resources will go up as demand goes up. This is not a "market failure"--it's how the market works. Nobody noticed when little countries became rich and successful consumers in earlier decades, (Kuwait, for example). It's different when the countries are China and India.

India and China, among many other nations, subsidize energy prices for their people, so there's no price signal for reducing consumption. The results are obvious. This is not a "market failure," this is classic socialist "economics" in action. Someone else on these boards thinks we ought to do the same thing in the U.S.

-- Another reason is that energy supply in the U.S.--a major world energy consumer--has been squelched by severe restrictions on oil and gas exploration and development in vast areas of our country.

Restricting supply and energy development is another way that prices are forced up. This is not a "market failure" either--this is the result of someone throwing a huge wrench into the market process. People are just beginning to notice this, and I predict interesting discussions on the subject before the next election.

-- Add to all this the brilliant idea of actually criminalizing and penalizing the process of combustion, and we have another factor in the pricing of energy. So far, this hasn't been a major factor, but not for lack of trying.

The "blunt instrument" of government intervention, ours and others, is what put us here.

Some references:

Here's George Soros describing four major causes of the oil price increase.

Note how government restriction of new development feeds into item one.

A related Salon article on subsidies.