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Originally Posted by dc_dux
Ace..where will that increased supply come from...particularly short term?
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This is not a short-term issue. Today we live with what we sowed in the past. The solution to this problem is to approach the root controllable causes that affect supply and demand. You are correct in that we can not control the Saudis, world demand, etc. I also agree with you regarding the need to change our consumption patterns for gas and oil. I also think we agree that this will take time.
Where we differ, I think, is regarding the impact regulation has on costs and whether some of those regulations are in fact necessary.
I also think we agree that there is currently risk and political premiums built into the current price of oil. I think our views on how to address those premiums is different. I think if we took an aggressive posture and action on new exploration, refineries, nuclear, and other alternatives, even with long-term tails, we immediately send a message to the world that would lead to a reduction in those risk and political premiums in the current price.
Oil company executives will manage their companies in a manner consistent with their view on what is needed for their companies to prosper. Oil exploration, and the development of new refining capacity takes large investments that will require a profitable returns over long periods of time. There is a point when it becomes unwise to invest additional billions today when future returns on that investment is uncertain. Oil companies clearly face a hostile group of legislators in Washington. They also face hostilities from other national governments, i.e. Venezuela. If we as a nation want oil companies to take more risks, we have to give them some level of assurance that the government won't unduly interfere with their operations. The constant threats of taxing and legislation forcing investment in certain areas is not helpful.
Another issue affecting investment by oil companies is the fact that they can spend millions attempting to get regulatory approval to build or expand refining capacity only to have government officials put a stop to it, in the eleventh hour simply for political reasons. Oil company executives make decisions the way you and I would. We need to understand that they are not our enemy and we need to give them the opportunity to do what they do best. When political people who don't understand the impact they have, play political games, they have to realize that over-time there will be consequences.
P.S. - On ANWR this says it all for me.
