Saudi Arabia hasn't increased supply. They just talked about increasing supply. It's not like they have a lever they can pull to open up some gushers (good article in today's Wall Street Journal on the topic). Even that is somewhat offset by loss of supply due to unrest in Nigeria. While there may be some speculation and weak dollar built into the price of oil, the underlying trend line is driven by supply and demand.
If Amercians had cheaper gasoline, all that would happen is we would backslide from our current belt tightening, and consume more. That would, you guessed it, drive prices back up. We are at a price equilibrium that is determined by lack of supply growth more so than demand. The problem is, there isn't any easy way to grow supply in the short term. Even doing a political stunt like cutting taxes on gasoline will have a neglibile effect, because it doesn't address the fundemental problem of lack of supply. If gasoline taxes were cut, there would be a very brief respite in prices. Then, GM would unload the rest of its SUVs, Americans would consume more, and drive the price right back up. These high prices are a good thing in the long run. It's forcing us to confront our lack of an energy policy, and it's making alternative solutions much more viable in terms of the underlying economics. I'm sure there will be a long series of major battery breakthroughs in the next 10 years. Why? Because the economic incentive and reward for doing so is huge (McCain's $300M prize notwithstanding).
there`s plenty of oil if the cars people used got decent mpg.
american new cars are going to be 35mpg in 12 years, that`s when the new cars start having to be, how long till most of the old cars are out? another 7-10 years? so in 20 years most american cars will be getting 35 mpg, everytime i read an article about cars getting bad mpg, it says that if american cars got 45mpg there would be no need to import oil, and that`s with the oil american produces today
Actually, I think the rising cost of oil is a good thing. The cynic in me hopes it goes even higher. When the average commuter can't afford the price of gas to get to work, THAT will be the day the government is pressured to deliver better fuel economy and divert more funds to alternative fuel research.
The Cost/Demand is off right now.
Price went up, so we stopped using as much fuel. So, prices should go down, but they went up.
So if we drove the prices down in any way shape or form, the increased use will probably not drive the price back up to where it is now.
That is totally illogical.
We have more then enough oil, period. The prices are due to lack of refineries.
The reason oil prices are up eludes me.
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