Anyone who thinks economics is an exact science simply hasn't been paying attention.

For example, instead of prices being determined strictly by supply and demand, a strong case can be made that they often reflect the triumph of emotion over reason.That much seems amply clear from last week's report from the U.S. Department of Labor, which blames the latest round of inflation on soaring energy prices that have nearly doubled since Iraq invaded Kuwait last Aug. 2. The oil price shock is said to account for more than half of the jump in inflation over the past two months.

Yet the simple fact is that the oil price hikes are being fed not by shortages but by rumors and exaggerated fears.

Only the other day, the U.S. Department of Energy reported that the loss of oil due to Iraq's occupation of Kuwait has been almost entirely eliminated. Other producers have stepped up production to offset the loss of Iraqi oil. Saudi Arabia accounts for more than half of the additional oil, followed by Nigeria, Libya, Iran, and Venezuela.

What conclusion can be drawn from the fact that oil prices remain high even though supplies are back to normal?

One possible lesson is that if Americans want stable oil prices, they must stop relying so much on oil from volatile foreign supplies and start developing energy sources within their own borders. A sensible place to start would involve stepping up the sagging production from Alaska's Prudhoe Bay, the nation's largest source of domestic oil.

That prospect outrages environmentalists, who object to anything that would disturb pristine wilderness. But the fact is that Prudhoe Bay is visited only by a few hundred people a year, most of them in the oil business. What about the possible adverse effect of oil drilling on local herds of musk oxen and migrating caribou? Similar fears were raised about the Alaska pipeline. But the pipeline was built anyway - and the wild herds have thrived alongside it.

By some estimates, increased output from Prudhoe Bay could reduce America's dependence on foreign oil nine percent by the year 2005. The prospect should be considered too important to pass up.