"For example, lets say you do manage to move our huge demand for oil towards alternative sources our demand for oil would drop dramatically making oil dirt cheap for the rest of the world that competes with us."
The problem of manufactured scarcity, with wide and disruptive variations in price, would be greatly diminished or even eliminated. The geostrategic risk associated with importing so much of our fuel for domestic energy needs, from such an unstable part of the world would also be greatly diminished.
So, demand might eventually fall worldwide, and the price would follow. I don't see the problem there, for the US or any other country, excepting the OPEC nations.
That is the crux of the problem, artificial economics created by goverments often make things worse but things aren't working that well for us now.
We are held hostage by artifical oil econimics created by a cartel (read monopoly). Who are the monopoly busters to allow a free market to work.